RNS No 1363u
OFGAS 
14th October 1997

Ofgas implements MMC report

Ofgas is today publishing the proposed modification to BG Transco's price
control to give effect to the recent recommendations of the Monopolies and
Mergers Commission (MMC).

The proposals follow the recommendations of the MMC report,* taking account of
increases expected by Ofgas in volumes of gas to be transported throughout the
price control period.

"Today's announcement marks the end of a process begun in 1995," said Clare
Spottiswoode, Director General of Gas Supply. "The licence proposals are the
result of an intensive process of public scrutiny, including successive
published proposals by Ofgas and a full MMC inquiry. The result will be a
considerable reduction in gas transportation charges to the benefit of all gas
consumers."

In response to consultations, and to provide the company with a financial
incentive to meet the increasing demand for gas, Ofgas is allowing 50% of
Transco's income to vary with the amount of gas it transports, as recommended
by the MMC.

However, an adjustment will be made to allow for the fact that demand for gas is
currently running above Transco's 1997/1998 forecasts used by the MMC when it
made its recommendation.

These extra volumes would increase Transco's revenues - and the costs to
consumers - above the amount the MMC considered necessary.  To bring Transco's
revenues into line with the MMC's recommendations, given expected additional
demand for gas, requires average transportation price cuts of around 25% in
1997/98.  This figure compares with a 21% cut recommended by the MMC.

If the volumes of gas transported by Transco turn out to be in accordance with
the company's earlier forecasts, Transco will still receive the revenue
recommended by the MMC.

Ms Spottiswoode said: "Our proposals should cut bills and give Transco the
incentive to meet the needs of customers.  This will be good for customers and
fair to shareholders.

"BG Transco is a company with great potential to contribute positively to the
British economy, by the safe and efficient provision of a vital part of the
nation's infrastructure.  Once the new price control is in place, Ofgas looks
forward to Transco taking full advantage of the opportunity to become one of the
most successful companies of its type in the world."

Notes to editors:

"In its report, BG Plc, A report under the Gas Act 1986 on the restriction of
prices for gas transportation and storage services, published in May 1997, the
MMC concluded that "the current charging condition may be expected to operate
against the public interest, by generating revenues higher than necessary for
Transco to finance its activities, contrary to the interest of consumers", and
recommended a 21 per cent initial reduction in charges, and subsequent increases
restricted to no more than RP1-2

The price control runs from 1997 - 2002

For volumes up to 3% above the MMC figure, there will be no increase in revenue.
But once the 3% margin is exceeded, Transco's revenue increases.

Copies of the Licence condition are available from the Ofgas Press Office (after
22 October from the Ofgas Distribution Centre, 3 Tigers Road, Wigston
Leicestershire LE18 4UX, Tel 0116 277 2617).

Press Enquireis:    Chris Webb    0171 932 1608
                    Fran Elliott  0171 932 1628
                    Mark Wiltsher 0171 932 1606
                    Tricia Back   0171 932 1605

END


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