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High price of tank gas is due to ‘weak competition’

Daily Telegraph: High price of tank gas is due to ‘weak competition’

“Shell is in the process of selling its worldwide LPG arm. Several private equity houses have been lining up a deal for the unit.”

Wednesday 24 August 2005

By Malcolm Moore (Filed: 24/08/2005)

Homes that are not connected to the national gas grid, but choose to buy gas in cylinders or tanks are paying more than twice as much for the privilege, the Competition Commission said yesterday.

The commission said there was “weak competition” in the domestic liquefied petroleum gas (LPG) market, which is dominated by four companies.

Calor, BP, Shell and Flogas supply 90pc of homes. Calor has half the market, which is worth around £120m a year. LPG is used by some 150,000 UK homes, mostly in rural areas. It is also used in patio heaters and barbecues.

The commission said competition-stifling practices have resulted in an average bill of £800 a year for LPG households. The annual mains gas bill is £390, according to Ofgem, the energy regulator. There is also a large disparity in the prices between the four companies.

“We have provisionally concluded that competition is not working as effectively as it should and that consumers are losing out as a result,” said Peter Freeman, chairman of the commission’s inquiry group.

“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.”

Tanks and cylinders from different companies have different valves, effectively tying customers to the same supplier. Household storage tanks have to be changed if a household decides to change its supplier, and the cost is passed on to the customer.

The commission said it would now consider how to remedy the situation, but suggested the process for switching between suppliers could be standardised.

Shell is in the process of selling its worldwide LPG arm. Several private equity houses have been lining up a deal for the unit.

Britain’s LPG Association pledged its co-operation with the ongoing consultation.

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