BRITISH GAS TO UNDERGO BROAD RESTRUCTURING

British Gas plc has unveiled a new structure for its U.K. gas business under its transition from state monopoly to international energy company. The changes arise from an investigation by the government's Monopolies and Mergers Commission that concluded the company's U.K. gas transportation and merchant functions should be split (OGJ, Aug. 23, Newsletter).

Dec. 27, 1993

3 min read

British Gas plc has unveiled a new structure for its U.K. gas business under its transition from state monopoly to international energy company.

The changes arise from an investigation by the government's Monopolies and Mergers Commission that concluded the company's U.K. gas transportation and merchant functions should be split (OGJ, Aug. 23, Newsletter).

The company said its 12 region structure will be reorganized into five independent businesses: transportation and storage, public gas supply, contract trading, servicing and installation, and retailing. A sixth unit will provide common services for 2 years before being absorbed into the five business units.

Restructuring, to begin in March 1994, will be phased in during 2 years. The move follows British Gas' announcement last August that 20,000 employees will be laid off during a 3 year period.

The restructuring announcement also follows publication by the Office of Gas Supply (Ofgas), the U.K. government's industry regulator, of documents outlining proposals for ways British Gas could share its transportation and storage facilities with independent suppliers and how independents could be charged.

Ofgas called for comments on the proposals by Feb. 11, 1994. Ofgas intends to have a tariff system for third party use of British Gas networks in place by October 1994.

Meanwhile, British Gas says it has lost nearly 70% of the U.K. firm contract market to independents, while a stringent price formula is squeezing profit margins in the domestic market and competition is growing in retail and servicing.

"These changes represent the most fundamental changes in organization and culture in our gas business in more than 40 years," said Norman Blacker, British Gas board member responsible for gas business.

"We shall become more competitive and strategically focused at a time when the gas market in Britain is going through a period of radical change."

Here are responsibilities of the new nationwide business units:

Transportation and storage division will provide British Gas and third parties transportation of gas from beach terminal to customers' meter outlets.
Public gas supply division will provide gas to domestic and small consumers.
Contract trading division will supply gas to customers, mainly industrial and commercial, using more than 250 MMBTU/year.
Servicing and installation division will concentrate on the gas central heating market.
Retailing division will manage gas appliance trading outlets.

The common services unit will provide finance, personnel, supplies, transportation and other services until they are established within the new divisions.