Lack of competition in LPG market leads to higher prices, says Competition Commission

Lack of competition in LPG market leads to higher prices, says Competition Commission

	Published : Thu, 25 Aug 2005 00:35 By : Richard Owen Print this Story

Britain's Competition Commission says country dwellers are paying excessively for liquefied petroleum gas as there is hardly any competition among the suppliers. The watchdog, which carried out a study among the users, said customers face a number of hurdles in obtaining a quote from rival supplier, let alone the best deal.

The Commission said it would consider some suggested remedies though these may essentially need large scale change in the attitude of suppliers rather than a change in the operation of the market. The remedies suggested include transferring the ownership of a tank when a customer switches supplier to the incoming supplier or to the customer himself.

Peter Freeman, who headed the study, said the LPG market is not expanding as it should and this impacts on the healthy competition among the suppliers. This also leads to higher prices.

An estimated 150,000 British households, mostly in rural areas, use LPG essentially for household heating, cooking and heating water. There are four companies -- Northern Ireland’s Calor Gas, Flogas, BP and Shell -- meeting almost 90 per cent of the 250,000-tonne a year requirement.

Lack of competition, said the Commission, lead to an average LPG bill of 800 pounds a year for households, while the annual mains bill is 390 pounds, according to Ofgem, the energy regulator.

Tanks and cylinders of different suppliers have different valves, which forces the customer to stick to a customer for ever. The supplier passes on the cost of changing a supplier to the customer.

The commission talked to users, suppliers, trade associations and the Government in conducting the study.

The country's LPG Association said it will cooperate with the Commission in bringing about a change, while BP said it welcomed any steps that promoted greater transparency for consumers. It, however, said the Commission will have to be careful in suggesting remedies. Shell said customers were mostly content with their suppliers, but it is cooperating with the Commission.