Price fear as gas monopoly is ended

Click to follow
THE GOVERNMENT is to end British Gas's monopoly over 18 million domestic customers 10 years earlier than expected.

Michael Heseltine, President of the Board of Trade, yesterday ignored a Monopolies and Mergers Commission recommendation, announcing that the monopoly will end in 1996 with full competition allowed by 1998.

The decision was attacked by the National Consumer Council and by the Labour Party, who argued that the decision will lead to higher gas bills, affecting the old and poor. They fear that new suppliers, including North Sea producers and electricity firms, will target the highest spenders and that uniform UK gas prices will end.

Mr Heseltine insisted that full and effective competition was the best way to ensure consumers got value for money.

The decision to end the monopoly was agreed by Ofgas, the industry watchdog, which said new providers already supply thousands of companies, undercutting British Gas by between 10 and 20 per cent. If offered to domestic customers, a 10 per cent discount would mean an annual reduction in the average household bill of pounds 35- pounds 40.

Rival suppliers already use British Gas pipelines and would continue to do so. They say they can undercut British Gas by greater efficiency in buying offshore gas and in their overall operations.

To ensure fair play, British Gas will be made to separate its pipes business from supply operations with 'chinese walls' - paying as much as other suppliers for transportation. However, Mr Heseltine rejected a second MMC recommendation it be forced to divest entirely its trading arm.

The National Consumers Council said: 'We fear that more competition in the domestic gas market may only benefit a small minority of consumers who use large amounts of gas, such as people in large houses.'

It argued there is no evidence to suggest the monopoly has hurt consumers, and that tough regulation of the company has meant prices are falling while standards of service have improved.

Robin Cook, Labour trade and industry spokesman, said many small consumers would see prices higher than would otherwise be the case. 'The uniform national price tariff is now also at risk - which will mean that your gas bill will depend on how far you live from the North Sea.'

There are also fears that the formula controlling British Gas prices for domestic consumers will be relaxed to compensate the company for lost market share, as recommended by the MMC. A decision on the price controls will be taken next year by Clare Spottiswoode, the new director general of Ofgas.

The Gas Consumer Council questioned whether prices for consumers would be better and called on Ofgas to make sure they would be driven down while standards stayed high.

Leading article, page 13

Industry reaction, page 35