'Issues letter' threatens Centrica's Rough deal

The competition authorities may block Centrica's £304m takeover of the Rough gas storage facility outright because of the power it would give the British Gas parent company to dictate prices to other suppliers.

The option of outright disposal or the divestment of a 70 to 75 per cent stake in Rough was aired in an "issues letter" sent out yesterday by the Competition Commission, which is conducting a four-month investigation into the deal. Other remedies canvassed by the commission include operating Rough as a joint venture or forcing Centrica to sell off other assets such as its interest in the Morecambe Bay gas field off the Lancashire coast.

The range of options also covers seeking undertakings from Centrica to ensure that Rough's full capacity is made available to other users, a "use it or lose it" provision to prevent Centrica hoarding capacity and auctions of capacity in which Centrica would not be able to bid.

Rough, which Centrica is buying from the US energy company Dynegy together with the Easington onshore terminal on the east coast, accounts for 85 per cent of total UK gas storage capacity.

In response to complaints from major energy users, Centrica, which in turn supplies 65 per cent of the domestic gas market, has said it would only use the same amount of Rough's capacity as it already does and ensure access to the remainder on non-discriminatory terms.

The Government referred the takeover to the commission in February after the energy regulator Ofgem, the Office of Gas and Electricity Markets, said it might be "detrimental to competition in gas and electricity supply markets".

The commission has until 9 June to report back.