Gas market faces monopoly review

The Monopolies and Mergers Commission (MMC) is to undertake a sweeping review of the gas market at the request of Michael Heseltine, the President of the Board of Trade. In a surprise move, British Gas asked for the reference yesterday after a series of rows with the industry regulator, Ofgas.

At the same time, Ofgas made an entirely separate reference of the company to the MMC after talks about competition in the market collapsed.

The commission's examination could herald wide-ranging changes for the company's 18 million customers and will fuel speculation that British Gas might be broken up. The company said that although it was a risky path, it was preferable to the 'piecemeal' regulation it had experienced over the past 18 months.

Cedric Brown, who takes over as chief executive of British Gas today, said: 'We are already facing major uncertainty . . . we hope an MMC investigation will provide a clear way forward for the company, its customers and its employees.'

Over the past 18 months British Gas has been forced to accept major changes in its operations, including a tougher price formula.

The Government has also said it will reduce the firm's monopoly over domestic and other small customers this year and may, in future, abolish it. The company has been told to halve its share of the industrial gas market, and to hive off its pipelines as a separate operation. That would allow other gas suppliers, including North Sea suppliers and electricity firms, to use the pipes on the same terms as British Gas's trading arm.

Mr Heseltine hopes to receive the review's results next spring.

British Gas seeks review, page 19