Watchdog warns on British Gas upheavals

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The Independent Online

Industrial Correspondent

Clare Spottiswoode, the gas industry watchdog, has warned of the damaging effect of boardroom upheavals at British Gas on communications with the regulator and on the company itself.

Ms Spottiswoode has already told Richard Giordano, chairman, of her concern and is expected to raise it again at a meeting tomorrow, primarily intended to discuss the future of Transco, the company's pipeline subsidiary.

Ms Spottiswoode feels that on some important issues it is not clear who, on the British Gas board, has responsibility, and who she should talk to. The problem is thought to have become worse since last month's sweeping boardroom changes that left Cedric Brown, chief executive, as the only member of the old guard.

Ms Spottiswoode said: "Mr Giordano has been there for two years, three executive directors have gone and only one replacement made. I sincerely hope they get it sorted out."

Her criticism comes amid big changes in the industry. Ofgas is in the throes of deciding how to regulate the British Gas pipeline - the company's main asset and one its rivals need to use. The watchdog is also consulting on the future price control for domestic consumers after the present price formula expires in 1997.

The board shake-out - the biggest since Mr Giordano became chairman in January 1994 - included the abrupt departure of Russell Herbert, the 51- year-old executive director with responsibilities including the global gas business. His duties have been assumed by Stephen Brandon, who recently joined the board from General Electric of the US.

It was also announced that Howard Dalton, who has responsibilities including exploration and production, would retire "in due course". Norman Blacker, whose dutries cover Europe and the UK gas trading operations, resigned as executive board member this month.

Ms Spottiswoode also holds the view that competition should help not only UK gas consumers but the company itself - making it stronger and more robust to compete in the global marketplace.

"It is taking a long time. The company has had huge challenges to cope with and is responding well. But we do not yet see a world-class company emerging," she said.

British Gas is struggling to fight its way back into the nation's favour after a year of public relations fiascos.

The group has been at the centre of controversy since it was revealed last November that Mr Brown's basic pay had been increased by 75 per cent to pounds 475,000.The demise of British Gas's reputation from one of being highly regarded by the public has astonished the City and is thought to have dismayed the regulator.

It is being forced to restructure to prepare for competition in the domestic gas market from next spring - a timetable imposed by the Government that has been widely, but quietly, criticised as being too tight. The resulting upheaval caused a deterioration in some service standards and unhappiness among many customers.