Hanson electricity firm enters battle with British Gas

MARY FAGAN

Industrial Correspondent

Eastern Group, England's largest regional electricity firm, has staked its claim to a share of the domestic gas market with a "grand slam" package including 20 per cent discounts and a "buy now, pay nothing until October" deal.

The latest threat to British Gas comes as the company faces a fresh row over its pipeline charges. A report by the accountants Arthur Andersen shows "obvious errors and omissions" amounting to hundreds of millions of pounds in the company's vaulation of its asset base - a key element in deciding what British Gas can charge rivals to use its pipes.

The move by Eastern, now owned by the industrial conglomerate Hanson, has for months been the subject of speculation within the industry. The group, which already supplies companies such as ICO, Rolls-Royce and Vauxhall, said yesterday that it aims to be one of the top three independent gas suppliers by 1998.

Trevor Turner, general manager of Eastern Natural Gas, said: "We represent a high quality alternative to British Gas. In addition to major cost savings, customers will enjoy a level of service and expertise which is substantial improvement on what they have come to expect." His comments come only days after warnings by Clare Spottiswoode, the industry watchdog, that British Gas must vastly improve service standards or risk a dramatic loss of customers to rival suppliers.

The domestic gas market opens to competition from 29 April in the South- west in an area covering 500,000 homes. Next year it extends to 2 million households with the market opening fully in 1998. Eastern joins a range of competitors including Total Gas and Amerada Hess.

South Western Electricity was the first electricity firm to launch its gas service but this has been blighted by complaints to the Trading Standards Authority over aggressive doorstep selling techniques.

British Gas has yet to reveal its response. However there is a widespread view that it will feel unable to slash prices in the South-west for fear of upsetting customers elsewhere and to avoid incurring the wrath of the Government.

Separately, the company faces the growing prospect of a reference to the Monopolies and Mergers Commission over imminent proposals by Ms Spottiswoode on what it can charge for the use of the pipes. She has signalled a clampdown on charges and if British Gas refuses to agree it must go to the MMC.

In the latest twist to the saga, it has emerged that a report by Arthur Andersen, commissioned by British Gas with the support of the rest of the industry, shows anomalies amounting to many millions of pounds in the valuation of Transco, the pipeline company. The asset base is a key part of the calculation of pipeline charges and rivals have argued that British Gas's pounds 18bn figure is far too large, suggesting that present charges are unfairly high.

British Gas has incensed rivals by saying that the report "clears the air once and for all" and vindicates its position. But while the report says that the overall values are "reasonable" it also highlights "obvious errors and ommissions" and "misstatements".

A spokesman for Transco said it was considering changing its valuation by about pounds 200m but no more. One rival to the company said that the figure should be reduced by pounds 1.5bn or more but the Transco spokesman said that the specific changes recommended in the report amount to a fraction of that.