Secret tariffs for British Gas

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The Independent Online
Tumbling gas prices yesterday led to the industry regulator, Clare Spottiswoode, to propose conditionally that all British Gas's business tariffs should be kept secret from 23 June.

The company has lobbied for the change, which will be initially for a year, because tough competition and falling prices have led to drastic falls in market share - from 100 per cent five years ago to 50 per cent last year and under 40 per cent now.

The move emerged as a regional power company, South Western Electricity, announced it would compete with British Gas in the domestic gas market from April next year, supplying gas to 500,000 electricity customers.

The UK gas market in the south west of England is to be opened up to full competition in 1998. Somerset, Devon and Cornwall are to take part in a pilot scheme ahead of this.

"We have done our sums and think we can offer at least 10 per cent off an annual gas bill of pounds 300," said a spokeswoman for South Western Electricity.

In the business gas market, British Gas is forced to publish tariffs for its customers, making it easy for competitors to undercut.

Mrs Spottiswoode proposed, in a consultation letter, that there should be four conditions before British Gas is allowed to stop publishing schedules of business gas prices.

British Gas said it believed the conditions would satisfy concerns about possible barriers to entry into the business gas market after it stops publishing prices. Its gas transmission subsidiary, TransCo, must offer acceptable compensation to shippers when it does not meet standards of service.

British Gas must agree with regulator Ofgas how it sells gas into the wholesale market.

There must also be an agreement between Ofgas and British Gas's consumer and commercial subsidiaries on how trade in peak period gas between the two businesses will be opened to other suppliers.

And British Gas must agree a licence condition banning undue discrimination in supply to customers.

Simon Kirk, business gas managing director, said his company had been "severely hampered by the requirement on it alone to publish price schedules, and the prospect of suspension of all schedules will allow it to compete more equitably".

Gas prices for small firms have fallen 25 per cent over the last year and interruptible supplies to users of all sizes have dropped a third in the last three months. "Prices are falling through the floor at the moment," said a British Gas spokesman.

The price war has been caused by a large surplus of supplies and by new entrants to the market, where companies such as Alliance, Mobil, Quadrant, Kinetica and Agas now compete for customers.

British Gas's share of the market for large industrial users fell to 15 per cent last October, when Mrs Spottiswoode allowed the company to stop publishing tariffs for those customers. But the move did not stop the company's market share of large users falling still further to 10 per cent.