Ofgas delays decision on price capping

The gas industry regulator, Ofgas, yesterday said it was to delay publishing the final version of its controversial price cap formula for the British Gas pipeline business TransCo until mid-August, as the war of words between the two sides intensified.

The proposals were expected to be revealed this week, but speculation that Ofgas was preparing a tactical retreat helped to boost the British Gas share price yesterday.

Ofgas said it needed more time to consider additional information on TransCo's capital expenditure which it had only received a fortnight ago. The situation has been further complicated because Clare Spottiswoode, the director general of gas supply, goes on holiday for two weeks from Friday.

An Ofgas spokesman said: "It's something Clare needs to deal with personally and she's not going to be here for a while. Otherwise the delay would have been shorter."

British Gas has described the current proposals, which are the subject of industry-wide consultation, as "the biggest smash and grab raid in history". They would cut TransCo's revenues by 22-28 per cent from next April, with cuts of inflation minus 5 per cent until 2002.

Last night British Gas refused to accept the Ofgas explanation for the delay. The company's deputy chairman, Philip Rogerson, said: "The information has been with them since March. It's very regrettable that we now have a three-week delay which increases uncertainty for our shareholders."

The latest dispute centres on figures for TransCo's operating costs for the 12 months to the end of 1995. British Gas had originally forecast operating expenditure of pounds 1.35bn, but says it found during the preparation of accounts that the true figure was pounds 1.45bn. The difference could significantly affect the amount of costs Ofgas allows when drawing up its price formula.

Privately, however, Ofgas believes British Gas is "playing games". Officials insist they made several requests earlier this year for TransCo's management accounts which they needed to reconcile with the data provided in the original forecasts. This detail did not arrive until a fortnight ago and additional information from British Gas was still being delivered as late as last night.