LETTER: Short-sighted at British Gas

From Lord Gillford

Sir: Richard Giordano is quick to assert that British Gas's "take-or- pay" contracts are "a legacy of a monopolistic era", when BG entered into contracts as a state monopoly in order to meet national supply obligations ("Thousands more Gas jobs at risk", 23 February). Quite ironically, British Gas is now calling for the Mergers and Monopolies Commission to conduct an inquiry into the matter.

At the time when Mr Giordano accepted the position of a non-executive director in 1993, BG's monopoly had already been broken, its share of the industrial market was in steady decline and plans to extend competition into the domestic market were well publicised. And yet, BG continued to purchase available gas production in the North Sea long after this time, even until the first quarter of 1994.

The real reason why BG finds itself in the current dilemma is because its highly paid executives failed to foresee the consequences of a combination of declining market share, a fall in prices and a gas glut.

If British Gas cannot find a way of addressing strategic errors of its own creation, without calling on the charity of other incidentally affected companies, then shareholders should find a new management that can.

Yours sincerely,

Gillford

London, SW1