Smear campaigns plague gas industry

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The Independent Online
A LEADING commercial rival of British Gas, as well as Ofgas, the industry regulator, are being targeted in a "dirty tricks" campaign.

Anonymous briefing notes about the company, United Gas, and Clare Spottiswoode, director-general of Ofgas, are being sent to selected journalists and MPs. The detailed, well-produced documents, which have been seen by the Independent on Sunday, are highly damaging to United and Ms Spottiswoode.

They suggest that United is benefiting from her personal economic beliefs and that she is hell-bent on breaking up British Gas's monopoly.

Most damaging of all, the same campaign is believed to have been behind a repeated rumour that United could not pay its bills. This has forced United to contact suppliers and reassure them that is not the case.

One of the reports invites recipients to ask a series of potentially awkward questions of United. Another raises doubts about Ms Spottiswoode's expertise and that of her deputy, Eileen Marshall.

The smears against United started in 1993 and have continued unabated ever since. The campaign has stepped up in recent months, however, as the deadline nears for competition to begin - in April next year - and Ofgas carries out a pricing review of the market for 18.5 million domestic gas users.

Since receiving a three-page note critical of Ms Spottiswoode two weeks ago, the Independent on Sunday has unearthed two further studies attacking Ms Spottiswoode and a third critical of United Gas. All appear to have been written by the same anonymous author.

The United Gas document draws attention to the way the company went about trying to secure licences to gain access to stocks of gas. To encourage new entrants into the market, British Gas was forced to relinquish some of its supplies.

Directors of United, with the full permission of the Office of Fair Trading and Ofgas, exploited the scheme by making multiple applications, using nominee companies. The note implies they were behaving improperly and acting in an underhand manner. Worse, it suggests, also wrongly, United's directors may have profited personally from the applications. "If they [the nominee companies] made a profit who took it?"

Why, asks the note, were the directors of United late filing annual returns? Why was 25 per cent of United registered to a corporation registered in Delaware, the US state that is home to many companies because of limited disclosure laws?

Nowhere is there any mention that United had kept the OFT and Ofgas informed from the outset of its intentions, or that the multiple applications had been approved by the authorities.

This report was sent in the same brown envelope with another document focusing on Ms Spottiswoode and her deputy, Ms Marshall, both of whom, it is alleged, are followers of the free market, competition-encouraging school of economics founded by Austrian Friedrich Hayek.

Ms Marshall is married to Colin Robinson, editorial director of the Institute of Economic Affairs. Michael Beesley, a colleague, advises Ofgas. Stephen Littlechild, director-general of Offer, the electricity regulator, studied under Professor Beesley at Birmingham University.

One of the unsigned pieces begins: "An IEA-based academic triumvirate believes that they have a duty and carte blanche right to remodel UK utilities."

That opening sentence is followed by three pages asserting links between Ms Spottiswoode, Ms Marshall, and professors Robinson, Beesley and Littlechild.

Another document is headed "Austrians" and implies Professor Littlechild and Ms Spottiswoode are being guided by some hidden hand. The same headhunters, it points out, were responsible for choosing both director-generals. Professor Beesley, it is incorrectly claimed, received a six-figure sum for his consultancy work. The two-page diatribe ends: "It does not look as though there is much internal expertise such as the [Monopolies Commission] hoped Ofgas would develop - or was supposed to develop as the result of the recruitment of Eileen Marshall according to Spottiswoode." According to the hidden author, the OFT is "not happy with Beesley's involvement as consultant to Ofgas and has raised eyebrows".

Roger Turner, managing director of United, said the company became aware of the smears when a number of journalists asked the same questions and appeared to be working from the same brief. "The first time we realised documents were being distributed was in 1993," he said.

In May this year, during the standing committee stage of the Gas Deregulation Bill in the Commons, Mr Turner said "there was literature distributed to MPs on the committee".

An Ofgas spokesman said the regulator was aware of the anonymous reports. "We are concerned this sort of thing is going on. We don't know why anyone is doing it - presumably to try to rubbish what we are doing. We have a requirement to control British Gas's monopoly prices and we will carry on."