U.K. regulatory agency Ofgas will review the price formula for gas sales to 17 million household and small industrial and commercial users in Britain.
British Gas still has a monopoly on gas supply to consumers using up to 25,000 therms (2.5 billion BTU)/year.
The review is said to be the most important single event affecting British Gas and its customers since privatization in 1986.
One of the major topics will center on the ability of British Gas to pass through its gas purchase costs.
At present the company's government license allows gas cost increases to be passed on in full, while other nongas cost increases are limited to 2% less than the rate of inflation.
The review will try to determine whether the fact that British Gas can pass on its gas costs encourages efficiency within the company and whether it is right in terms of energy efficiency.
Ofgas soon will publish a study of "least cost planning" in the U.S. gas industry, which will discuss ways gas companies can give a boost to energy efficiency.
The review also will look at what sort of cost savings British Gas should be able to make in running its business.
And it will investigate whether British Gas makes a fair profit in relation to the degree of risk involved.
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