British Gas slams ‘leading’ price control consultation

Big six supplier British Gas has slammed Ofgem’s approach to determining the need for a mid-point review (MPR) of the eight year price control for networks as neither “demonstrably comprehensive or robust”.

In a submission to a recent consultation it said the “restricted” information provided by Ofgem about network companies’ performance is “by design, limiting the level and effectiveness of stakeholder engagement” and “as such it is likely to lack credibility”.

British Gas said: “In pursuing this approach, Ofgem is effectively depriving itself of the ability to be adequately equipped when determining whether price controls are set in a way that genuinely maximises efficiency in accordance with Ofgem’s duties and obligation”.

British Gas said it has identified “a number of significant issues” which it said shows the need for an MPR for gas distribution, contrary to Ofgem’s findings that there are “no material issues” that would warrant a review.

British Gas said stakeholders have been provided with “very little assistance” in being able to identify potential issues from just four pages of analysis despite gas distribution having “revenue allowances of over £29 billion funded by customers over the price control”.

It added: “No reference is made to the fact that customers are expected to fund networks at a level billions above the costs networks are facing.

“There is a requirement, not least in terms of transparency, for Ofgem to expand on this”.

It argues that for relevant issues to be identified Ofgem should have presented a comprehensive overview of performance against outputs to date, an identification of drivers for outperformance and underperformance, and as assessment of these drivers against the MPR criteria.

The energy industry is divided over the need for an MPR for companies operating both in electricity and gas transmission, and gas distribution. British Gas and Citizen’s Advice said one is required in all three sectors while network companies are fearful of an MPR effectively creating two shorter four-year control periods.

British Gas referred the RIIO regulatory regime for the power networks to the CMA last year.  The CMA dismissed four of the five grounds of appeal brought forward by British Gas but upheld one, reducing the amount of revenue the networks are allowed to recover through charges by around £105 million over the eight-year price control period.