Suppliers seek suspension of British Gas penalties

MARY FAGAN

Industrial Correspondent

Seven large gas supply companies have complained to Ofgas, the industry watchdog, over the alleged failure of the system which since 1 March has been balancing gas supply and demand. The companies accuse British Gas, which operates the so-called Network Code, of "chronic data deficiency and failure of information flows".

The companies, which include North Sea producers and large business suppliers such as Alliance Gas, face penalties which could amount to millions of pounds a month - paid to British Gas - for failing to meet obligations to supply the right amount of gas into the pipeline system to meet their customers' demands.

The letter to Clare Spottiswoode, director general of Ofgas, attacks the "unacceptable and unqualified risks" to which they believe they are being exposed and calls for the suspension of any penalty payments until the problem is sorted out.

A spokesman for Alliance Gas said that British Gas Transco - the part of the company responsible for the Network Code - can underestimate or overestimate the amount of gas needed by 15 per cent. "There is simply a very large discrepancy between what shippers know that they must put in to achieve balance and what Transco calculates we must put in," he said.

The complaint comes at an embarrassing time for the Government, which is introducing competition in domestic gas supply in the South-west from 29 April. British Gas's rivals mainly supply businesses at present but the problem with the Network Code could mushroom once hundreds of thousands of households have the ability to switch away from British Gas.

Ian Powe, director of the Gas Consumers Council, said: "It's the same gas and the same Network Code - and the load-balancing problems are potentially much bigger."

A spokesman for Transco said that it had heard the shippers' views at a meeting yesterday and would look again at its calculations next week.

Separately, Ofgas is poised to launch a campaign warning customers in the South-west of the dangers of aggressive doorstep selling by rivals to British Gas.

South Western Electricity's gas marketing arm and CalorTex, a joint venture between Texaco and Calor Gas, have already been heavily criticised by the Gas Consumers Council for bad practice in marketing their services to domestic consumers. Ofgas is keen to avoid any acceleration of the problem as 29 April approaches.

Ofgas licenses new gas suppliers but its powers under the Gas Act do not extend to marketing technniques. However, the watchdog, which has discussed the issue with the Office of Fair Trading and the GCC, is concerned that the problem will hamper the successful start of domestic competition by putting people off alternative suppliers and "leaving a bad taste in the mouth".

An Ofgas source said: "No one wants competition to get off to a sleazy start. It is not in the interests of competition to have people hoodwinked in this way and we just want things to run smoothly."

An important aim of the Ofgas drive will be to tell people that they are entitled to a seven-day "cooling off" period in which they can opt out of a contract signed as a result of an unsolicited approach. The watchdog will also warn through leaflets and local information services that doorstep sellers are trained to gain consumers' confidence and are unwilling to take no for an answer. The Ofgas source said the message is to be prepared and to remember that "you can change your mind".

The authorities received more than 150 complaints about Sweb.