Watchdog concerned BGE could go bust

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The Independent Online

Industrial Correspondent

The Gas Consumers Council has called for assurances from the Government and British Gas that the company set up to serve domestic consumers will be financially viable. The GCC warned that consumers must not be asked to bear the pain if British Gas Energy, as it will be called, goes ``bust" because it has insufficient assets to cover potentially massive liabilities.

British Gas said earlier this week that BGE will have pounds 2.6bn in assets and will also take on long-term contracts with North Sea producers, which are forcing the company to buy much more gas than it can sell. The GCC said yesterday that "worried by suggestions that BGE might be undercapitalised" it has asked both the Department of Trade and Industry and British Gas for details of the pounds 2.6bn-net assets. The council added that it also demanded to know what allowance has been made for an estimated pounds 1.5bn-or-more of liabilities related to the long-term contracts that are now vested in BGE.

Ian Powe, director of the GCC, warned that the Government must not resurrect the notion of a gas levy on consumers, recently put on ice, in order to bail out the company. "We do not want to see it [the levy] being warmed through again to protect BGE shareholders at the expense of customers," he said.

The split of British Gas into BGE and TransCo International - announced earlier this week - was originally thought to be good for consumers. But the council is thought to have been concerned since then by a divergence of views in the City over whether the consumer arm will be sufficiently strong to cover the costs related to the long-term contracts. British Gas has billions of pounds of contracts with producers at prices well above those available in the market,many of which date from when the company had a monopoly.