RNS No 1967n
OFGAS
2 June 1999

OFGAS BEGINS CONSULTATION ON NEXT BGT PRICE CONTROL

Ofgas today published a preliminary consultation document* that looks at the
options for a review of the new price controls for British Gas Trading (BGT), a
subsidiary of Centrica plc, the dominant gas supplier to the domestic market.
The current control expires on 31 March 2000.

The document considers how customers have been affected by the current price
controls and asks for views on a number of future options.  These include:

 - continuation of the existing form of price control;

 - a system of relative price regulation based on cost-reflective differentials
   between the various BGT tariffs, to seek to ensure that the benefits of
   competition are spread more evenly across customers; and

 - removal of BGT's price control from 1 April 2000, and relying instead on
   conditions in the supply licence and powers forthcoming under the Competition
   Act 1998 to protect customers.

Responses are invited by 2 July 1999.  Ofgas expects to publish initial price
control proposals later this year.

NOTES TO EDITORS

1.        BGT is the dominant player in the domestic gas supply market,
          supplying approximately 77 per cent of customers who consume below
          2,500 therms per year.

2.        The principal costs of gas supply to the domestic  market are:

          Gas purchases                  42.7 per cent
          Transportation and metering    38.7 per cent
          Storage                        2.0 per cent
          Supply costs and margin        12.1 per cent
          Under/over recovery allowance  4.4 per cent

3.        At present all costs other than supply costs and margin are subject to
          a cost pass-through, although BGT must show that it has puchased them
          economically.  Supply costs and margin are subject to RPI-X style
          controls, where X is presently 4 and the implied margin allowed at the
          last review was 1.5 per cent.

4.        The present price controls apply to four tariffs, Direct Debit, Prompt
          Payment, Standard Payment and Prepayment.  Based on an annual
          consumption of 643 therms, the average gas bill for each of these
          tariffs is between #269 and #310.

5.        A similar paper for electrlicity supply regulation will be published
          shortly.


Media Enquiries

Ofgas Press Office:
          Mark Wiltsher       0171 932 1606
          Andy Whateley       0171 932 1668
          Out of hours        0374 728971

*Copies of "Review of British Gas Trading's Domestic Gas Supply Price
Regulation: a Consultation Document: are available from Ofgas Distribution
Centre, 3 Tigers Road, Wigston, Leicestershire, LE18 4UX. Tel: 0116 277 2617.
The document will also be available on the Ofgas Web-site at:
http://www.ofgas.gov.uk/

Ofgas Press Releases can be accessed on the Internet at:
www.coi.gov.uk/coi/depts/GAS/GAS.hmtl

END

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