§ Sir John Hannam
To ask the President of the Board of Trade what plans he has for consultation on the choice of areas for the extension of competition in the gas market which he has proposed would be introduced from 1996 to 1998.
§ Mr. Eggar
I have today published a consultation document jointly with the Director General of Gas Supply, Clare Spottiswoode, on the choice of the initial areas for the phased extension of competition into the gas market between 1996 and 1998.
Subject to enactment of the proposed Bill by Parliament, we propose a first phase starting in April 1996 which would introduce competitive gas supply to a geographic area of Great Britain containing up to 500,000 premises which consume less than 2,500 therms of gas a year. A second phase starting from a date in 1997 would extend competition to an area or areas containing a total of 2 million such premises. Finally, from a date in 1998, it is intended that the entire gas market in Great Britain, some 18 million premises, should be open to competitive supply.
We intend to announce the prospective areas chosen as soon as possible, so that, subject to parliamentary consideration of the Bill, all may plan accordingly. Once we have considered the responses to the document, my aim is to make an announcement early in March.126W
The initial phases are important steps in the proposed move to full competition at the national level in 1998. They will provide an opportunity to ensure the satisfactory operation of the new management and computer systems necessary to ensure the accurate measurement, balancing and allocation of gas. Systems will also be needed to ensure the orderly handover of responsibility where a consumer decides to change supplier. The phased introduction of competition will allow those responsible for these systems time to ensure their fully satisfactory operation.
It will be convenient if the area chosen is geographically well delineated and coincides with existing administrative boundaries and clearly demarcated part of the gas pipeline network. We should like the area chosen to contain examples of the full cross section of types of premises and customer and include both urban and rural environments. The area chosen should provide a good test of the arrangements for measuring gas and so on, and handling changes of customer.
Subject to these other factors, we consider it would also be reasonable, in choosing the initial area to benefit from competition, to take into account the pattern of regional transportation charge differentials which were introduced in October 1994. The independent suppliers have said that they expect to offer average savings of some 10 per cent. on current BG prices. Within that pattern, they may—or may not—choose to pass on the differential transportation charges, which amount to around plus/minus 2 per cent. of final prices. I have noted in this context the recommendation of the Trade and Industry Select Committee thatareas likely to be disadvantaged by cost reflective charges should be included amongst those selected".
In the consultation document, we are seeking views on the choice of the initial area in 1996. We are also seeking views as to whether the area for the second phase in 1997 should be:
- (i) a single geographic area (enlarging the area for the first phase); or
- (ii) split between two or more distinct areas (of which the first phase area would be one or part of one).
There may be some technical arguments in favour of the first alternative. On the other hand, the second alternative would enable more than one area to gain experience of competition.
In order to gain as much information as possible from the initial phases of competition, the Director General of Gas Supply may invite consumers and appropriate representative groups and persons to supply information to help her monitor the development of competition. It will therefore be helpful if representative organisations in the area concerned are prepared to assist in this process. Parliament will have an opportunity to debate the issues 127W related to the initial phases of competition during the passage of the forthcoming Gas Bill.
The consultation document has been sent to all local authorities in England, Scotland and Wales as well as to all Members of Parliament, consumer groups and the gas industry. Copies have also been placed in the Printed Paper Office in the House of Lords. The deadline for responses is 24 February.
Further copies of the document can be obtained from the Library of the Office of Gas Supply, 16 Palace street, London SW1E 5JD, telephone 0171 932 1602/3/4.