VAT 'will wipe out benefits of gas price cuts': Lower charges in future will arise from competition with British Gas, says regulator

THE introduction of VAT on domestic fuel will 'largely negate' the benefits of lower prices since British Gas was privatised, according to Clare Spottiswoode, the director general of Ofgas.

Ms Spottiswoode said that because of regulation of the industry by Ofgas, domestic consumers had seen gas prices fall by about 20 per cent in real terms since 1986.

Although she can do nothing to stop the introduction of VAT on fuel from April, Ms Spottiswoode said she would continue to ensure customers received good value for money and that those suffering hardship would be dealt with sympathetically.

Speaking at the launch of Ofgas's annual report, Ms Spottiswoode said price cuts in future would come more from competition in gas supply than from regulation. She also predicted that competition would result in new products and services, which could include natural gas vehicles and off-peak low prices for gas-fired tumble driers.

Ms Spottiswoode said that the question of how long domestic gas prices would remain regulated depended on the speed at which new suppliers, including electricity companies and North Sea producers, entered the gas market. The British Gas monopoly over domestic and other small customers ends in 1996 with full competition scheduled for 1998.

The regulator welcomed a new era of co-operation with British Gas. 'British Gas now appears to be embracing the idea of competition - because it wants freedom from us. On a wide range of issues we are on the same side of the fence,' she said. Ms Spottiswoode warned however that there would be tough regulation of the pipelines for a long time to ensure fair terms for other suppliers that need to use British Gas pipes.

The Ofgas report shows that complaints about British Gas almost levelled off at 1,842 in 1993, compared with 1,827 in 1992, but Ms Spottiswoode said that more needed to be done.

One London church received a bill for pounds 3,809 after getting estimated bills for two years, but after intervention by Ofgas, British Gas reduced the bill to pounds 850. In another instance, a customer was quoted pounds 2,311 for a gas connection to her home and, on inquiring again six months later, was quoted pounds 4,182. The customer complained to Ofgas and subsequently the company offered a connection for pounds 1,964.

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