Clash over Gas Bill

Main points of the Bill: o Competition in gas supply to homes by the end of 1998, starting with a pilot scheme next year. o Separate licences for gas supply to customers, operation of piplelines, and shipping gas over the pipes o A possible levy to help

The Government has clashed with Ofgas, the gas industry regulator, over new legislation for the industry. The legislation substantially reduces Ofgas's powers.

The Gas Act, published yesterday to pave the way for competition in the domestic market, allows the Secretary of State for Trade and Industry to veto for the first time possible references by Ofgas to the Monopolies and Mergers Commission.

Ofgas said the change would "be seen as compromising the political independence of the regulatory process".

The regulator also attacked a decision not to allow it freedom to publish information on the British Gas pipeline, which remains a monopoly and will be used increasingly by other suppliers of gas. "The public has a legitimate interest in this information and there is no question of competitors gaining an unfair advantage. We think that the present restrictions on Ofgas powers to disclose information should be relaxed," it said.

Ofgas has also been denied a request to extend its regulatory powers offshore. Clare Spottiswoode, director-general of Ofgas, is concerned that without power over gas terminals and offshore operations, she might have difficulty in dealing with "possible abuses" by companies that both produce gas and then trade it onshore.

In spite of disagreements over its powers, Ofgas welcomed the Bill as a means of introducing competition and looking after the interests of consumers.

The Gas Bill is intended to allow for competition in the supply of gas for 18 million households by the end of 1998, beginning with a pilot next April covering about 500,000 homes.

Tim Eggar, the energy minister, said prices could fall by about 10 per cent in a competitive market, but he acknoweldged that people in some parts of the country would pay more than others. Those with the highest bills are likely be in areas including Wales and the south-west of England, which are far from where the gas is landed at the coast.

Mr Eggar attacked the notion that the Government could use its special share in British Gas and other utilities to curb boardroom pay and perks. "This flip idea that government can intervene to overturn decisions taken by companies is naive. The whole purpose of flotation and privatisation of the utilities was that they should be got out from under the Government."

The Gas Bill will attempt to prevent cherry-picking by rivals to British Gas and to force all operators to provide service on request in their licence areas, including elderly and disabled people and those who cannot pay their bills.

Should British Gas still be left with a disproportionate number of these less-lucrative customers, the Bill provides for a levy on all suppliers to help to cover the cost.

The Bill will for the first time allow Ofgas to fine companies that breach their licence conditions, although the detail of the potential penalties is so far unclear. British Gas will have to maintain its current regulated standards of service, but regulation of the company is likely to be relaxed once competition is fully in place.

The Gas Consumers Council attacked moves to give Ofgas, rather than the Government, responsibility for the prevention of discrimination between customers, obligation to supply and the need to publish tariffs.

Ian Powe, director of the GCC, said: "All these have been transferred from parliamentary control to the discretionary control of the regulator. There will be a debate over this."