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THE TIMES (UK): Watchdog turns up heat on gas suppliers: Wednesday 24 August 2005


By Rhys Blakely, Times Online


British consumers pay too much for liquefied petroleum gas (LPG), the main alternative to mains gas for heating and cooking, because competition between suppliers is weak, according to the competition watchdog.


"Customers face a number of hurdles in obtaining a quote from another supplier, let alone the best deal, and it is necessary to change tanks when a customer switches supplier," said the chairman of the Competition Commission’s inquiry group Peter Freeman.


"The market overall is not expanding significantly. The effect of all this is to limit competition between suppliers, and discourage entry and expansion, leading to higher prices for most consumers," he said.


LPG is formed underground over millions of years. Gas rigs produce a mixture of gasses, which are then separated into methane (mains gas) and propane and butane - the two types of LPG. LPG is also produced from crude oil at refineries.


Around 150,000 British households, mostly in rural areas, use LPG and four companies, including Northern Ireland’s Calor Gas, Flogas, BP and Shell, control about 90 per cent of the 250,000-tonne household market. Calor alone supplies half of it.


The fuel is also used by industry and has been flagged as a possible environmentally friendlier alternative to petrol to run cars.


Mr Freeman said the commission will now consider what action to take but added that it is likely to seek commitments from suppliers that they would change their behaviour rather than call for a more drastic reorganisation of the market's structure.


The regulator said a weakness of competition made itself felt through the differences between average prices for LPG, the fact that few customers switch between suppliers or obtain discounts and suppliers' high profits.


The commission reached its preliminary conclusion after a customer survey and hearings with suppliers, trade associations and the Government.


Britain’s LPG Association pledged its cooperation. "We’re working closely and cooperating fully with the commission," said Tom Fiddell, LPGA’s director-general.


The UK LPG market currently stands at 1.2 million tonnes. Mr Fiddell said the commission’s inquiry covered only about a fifth of that market, or the 250,000 tonnes sold to 150,000 domestic households who use it mainly for cooking and home heating.


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