Rules stall gas meter spin-off

Attempts by British Gas to spin off meter reading into a joint venture with the Group 4 security firm have stalled. British Gas has been stymied by employment rules that prevent it transferring staff to the new entity on different working conditions.

It had planned substantial alterations to pay rates, working hours and bonuses for the 1,200 staff involved in the transfer.

British Gas originally hoped to have the venture in place well before the start of competition in the domestic gas market. A pilot scheme introduced competition in the South West at the end of last month, but by 1998 it will start for all 18.5 million domestic gas consumers across the UK.

A British Gas spokesman commented: "Putting meter reading into a joint venture is only one of the options available." He declined to outline the others, but one could be to ask TransCo to carry out the work. It owns the pipelines and meters and is on course to be demerged from other British Gas operations next year, so it could carry out the work independently of those battling to win or retain gas customers.

British Gas had hoped that the joint venture would eventually win other meter- reading work, not only from its new competitors in the domestic gas market but also from electricity and water enterprises.

Employee rights are protected by the so-called TUPE rules - the Transfer of Undertakings (Protection of Employment) Regulations.

British Gas this week is expected to report increased first-quarter profits, thanks to the unusually chilly winter. Analysts are forecasting net profit before exceptionals rising from pounds 605m last time to pounds 620-pounds 670m.

The cold will have boosted exploration results and gas sales as well as income for TransCo, which will hear the preliminary results on its pricing review by Ofgas tomorrow (see page 1).

Analysts said the results would be held back by continuing losses on gas trading, where British Gas is locked into "take-or-pay" contracts that oblige it to buy from North Sea suppliers at higher prices than spot rates.