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OFT to Meet Manx Gas over Gas Bills 21 April 2004

At its regular monthly meeting the Board of the Office of Fair Trading considered various research documents outlining the circumstances surrounding more than 50 complaints it had received from natural gas customers about excessively high gas bills.

Many of these customers have seen their most recent bills increase dramatically when compared with the similar period last year but the Office believes this is not solely the result of any significant price increase.

All gas tariffs (including LPG and LPG/Air systems) were increased by 4% on 1st January 2004 and according to Manx Gas this was to take account of increased operating costs such as salaries, pension provision, insurance and increased health and safety requirements. However, a surcharge of 0.341 pence per unit (almost 9% on central heating tariff) was also levied on all natural gas tariffs from the same date. The surcharge was levied to cover the increased cost of natural gas which reached unprecedented levels during the winter.

The Office receives monthly purchase and sales figures from Manx Gas following the last gas price investigation carried out in the year 2000. At that time central heating tariffs rose by 25% in just two months and by the end of that year were 34% higher. From the information now supplied by the company the Office is able to monitor price movements more accurately and believes the surcharge applied on 1st January reflected the price of natural gas prevailing at that time.

Furthermore, the surcharge was reduced on 2nd February and again on 1st March and currently stands at 0.17 pence per unit which is half what it was at the start of the year. Despite this the Office believes further reductions should be made in the coming weeks if the price of natural gas returns to expected levels.

Vice-Chair of the Board, Mrs Brenda Cannell MHK said,

"Manx Gas notified the Office in June last year that they would be able to hold tariffs at current levels when natural gas came on stream provided they could purchase gas within a certain price range. Unfortunately prices for natural gas during this winter have been up to 20% above expected levels and the company maintain they could not absorb such increased costs."

She went on to say,

"We are now seeing prices edge towards expected levels for this time of year and will be pressing the company to reduce the surcharge still further. There is however, real concern that long term forecasts for next winter suggest that prices may well be as high as they have been this year and the company need to do everything they can to minimise the effects of these high prices on their customers. We will be holding talks with them to gather additional information and to ascertain if they can absorb more of the increased costs rather than passing these straight onto customer. Should the company refuse to provide the necessary information or fail to co-operate we will be obliged to undertake a price investigation under Section 19 of the Fair Trading Act. This would be only the start of a lengthy process that could take up to 12 months to complete and we are pressing for the Council of Ministers to bring forward proposals to introduce an energy regulator which the board believe could be put in place much quicker and to greater effect for gas consumers."

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