Challenge to legality of gas bill discounts

Price changes announced by British Gas in December could be illegal, according to the Consumers' Association, because they benefit some domestic customers and disadvantage others. The association has written to the regulator, Ofgas, to demand an investigation into the British Gas decision to raise prices generally while introducing substantial discounts for those who pay by direct debit.

British Gas increased prices from this week by £10 a year for a typical customer but said that people paying by monthly direct debit will be given a discount of £19, leaving them £9 better off even after the price rise. The move has angered many customers, including pensioners and the less well-off, many of whom pay promptly but are unable to do so by direct debit.

In today's edition of Which? the Consumers' Association says: "In the run-up to the introduction of competition, the law is supposed to prevent British Gas from `cherry picking' - unfairly keeping the best customers by offering them a special deal.

"This discount arguably breaches the Gas Act, and we've called on Ofgas to investigate. It also penalises those customers who choose to pay on time by other methods."

The attack is a further blow to British Gas, which has been struggling to restore its image since November when it confirmed a 75 per cent increase in the total pay of Cedric Brown, its chief executive. It has since emerged that the company is to stop bill payment at showrooms, will cut some staff salaries and is sharply reducing part of the budget for safety in the pipeline.

A spokeswoman for British Gas said: "We have carefully considered the legality of the discounts but believe it is not discriminatory." She said the company hopes later this year to introduce discounts for people who pay on time by means other than monthly direct debit.

Ofgas, which is keen to see fair play for all prompt payers, said that it is discussing the issue with British Gas.

The Consumers' Association is also asking why the savings offered to monthly direct debit customers is so large, pointing out that BT offers a discount of £4 per year to such customers and that electricity firms allow £3 to £5.