The attack came as the gas industry regulator, Clare Spottiswoode, announced Draconian new price curbs that could cut the typical domestic bill by pounds 30 from next year but result in up to 10,000 job losses in British Gas's pipeline business, TransCo. The announcement wiped more than pounds 1bn off the stock market value of British Gas as its shares tumbled by more than 10 per cent.
Philip Rogerson, deputy chairman of British Gas, said: "These proposals, if implemented, would be devastating for shareholders, awful for our employees and contrary to the interests of gas consumers generally. This is a very black day for Sid."
More than 4 million small investors applied for shares when British Gas was sold off in 1986 with the famous catchphrase: "If you see Sid, tell him," making it the most successful privatisation ever.
Last night City analystswere questioning the impact of the Ofgas announcement on other privatisations. Nigel Hawkins, of the Japanese bank Yamaichi, said the Ofgas statement could bode ill for Sids in other privatised industries while Stuart Valentine, of ProShare, said: "This sort of blow for a company of British Gas's standing in terms of numbers of shareholders is something that is not good for wider share ownership."
The row came two days before applications close for the pounds 1.8bn Railtrack flotation and just as the Government is beginning the countdown to the pounds 2.6bn sale of British Energy in July.
Last night Labour seized on the timing of the Ofgas announcement, claiming that it had been held back by a week so as not to discourage private investors from buying shares in Railtrack.
Brian Wilson, the party's transport spokesman, said: "This is a warning of what regulatory intervention can do to benefit the consumer rather than the shareholder. Ministers would not want such a message to emerge at the most sensitive moment in the Railtrack sell-off." Ofgas denied, however, that there was anything sinister about the delay, saying that it had been caused by a hold-up at the printers.
Mr Wilson said it appeared the Government had been fearful of the British Gas upheaval influencing investors as they prepared to send of their cheques for Railtrack.
By last Friday, about 200,000 small investors had applied for Railtrack shares with a last-minute rush expected in the final few days before applications close.
The huge gulf between British Gas and its regulator means that dispute is almost certain to be sent off to the Monopolies and Mergers Commission for an inquiry lasting at least six months.
This could cast doubt over the planned demerger of British Gas into two separately quoted companies - TransCo International and British Gas Energy - and the introduction of full competition for 19 million domestic gas consumers in 1998.
Mr Rogerson said an MMC referral was "highly probable" as it could not accept Ofgas's proposals as they stood. "If implemented, the proposals would represent the seizure of shareholders' income on an unprecedented scale and would undermine confidence in the whole regulatory system."
The company estimated that the new formula for capping TransCo's charges for five years from next April could reduce revenues by some pounds 650m to pounds 850m a year and force it to reduce TransCo's 20,000 workforce by up to a half.
But Ms Spottiswoode dismissed British Gas's claims, saying the new price controls could be met by a 4 per cent productivity gain a year and putting the potential number of job losses at nearer 5 per cent of the workforce or 1,000. "The proposed targets are challenging but in our view achievable," she added. "They represent a fair balance between the interests of customers and the interests of shareholders."Reuse content