London Electricity set to supply gas to capital

LONDON Electricity is breaking into the gas supply market through a joint venture with Total Oil, a North Sea producer of oil and gas. The new company, London Total Gas, will supply gas to commercial and industrial customers in the capital in competition with British Gas and use existing British Gas pipes.

The announcement means that almost all the 12 regional electricity companies are involved in gas supply. Northern Electric, the exception, has said it does not wish at present to enter the market.

A spokesman for London Electricity said: 'We are in the energy business and can look to provide other options as well as electricity.'

Peter Nicholls of Total, who will chair the new venture, said: 'This is a major strategic move for both companies. The combination of our resources should enable us to become the capital's preferred supplier of natural gas.'

Total has a similar gas supply agreement with Yorkshire Electricity while other electricity companies have joint ventures with companies including Phillips, Alliance Gas and Utilicorp.

The entry of new gas suppliers follows a ruling by the Office of Fair Trading that British Gas should more than halve its share of the industrial gas market to 40 per cent over the next few years.

To allow this, British Gas is being forced to sell gas from its existing contracts with North Sea producers to competitors. London Electricity said, however, that as Total has its own North Sea resources, the new joint venture will only have to rely on British Gas to deliver the fuel to customers through its existing pipes.

British Gas is obliged to carry gas belonging to competitors. However, recent arguments with Ofgas, the industry's regulator, over the terms for doing so have resulted in British Gas being referred to the Monopolies and Mergers Commission.

Ofgas has licensed about 30 companies to compete in the gas supply market. Only large gas users benefit from the liberalisation at the moment as British Gas has a monopoly over customers using fewer than 2,500 therms. But the Government has said it will review the situation next year and may allow competitors to supply domestic customers as well.

Other players emerging in the gas market include Amerada Hess, Kinetica, Quadrant Gas, Mobil and Texaco. Ofgas said that as well as these bona fide suppliers, some companies have bought gas that British Gas has been forced to sell, but have immediately sold it on again. These companies are not supplying to end- users and are not among the companies licensed by Ofgas.