Large industrial users fear they will not see significant reductions in their gas bills over the next year, despite last week’s recommendation by the Monopolies and Mergers Commission for an immediate 21% cut in transmission charges.
While Ofgas, the industry regulator, claimed that commercial and industrial customers would enjoy reductions of 5-7% in 1997-98, the big users are not so certain.
The Major Energy Users’ Council believes that because of the MMC’s concession in allowing Transco, the pipeline arm of BG, to claw back £285m of `under-recovered’ revenue from the previous price-control period, together with the commitment to shave £29 off the average domestic bill, may mean big consumers not benefiting until 1998-99 or later.
`There’s certainly some doubt as to what the first year will yield,’ said Eddie Proffitt, chairman of the MEUC’s gas group. `We don’t believe that the 21% will come.’
The under-recovery relates to an arrangement whereby Transco was allowed to earn an average revenue of 13p a therm on gas it piped. The growth in power station consumption produced the shortfall as power stations, which use only the high-pressure mains, are charged just 1.5p a therm.
While Transco recovers the difference from the gas supply companies, they pass it through to their customers. Over the 18 months it was in dispute with Ofgas, Transco did not attempt to reclaim the lost revenue.
The users’ council dislikes the way in which the MMC overturned an Ofgas proposal to prohibit Transco from passing through the costs of reinforcing the national transmission system to compensate for the Interconnector pipeline to the Continent.
Proffitt said members would not wish to subsidise gas exports in this way, and might ask the Department of Trade and Industry to put a levy on exporters, to be used for any necessary expansion in the system’s capacity.