Page 3: Pricing and competition
Transco’s revenues are earned within a price control linked to the rate of inflation and modified by an efficiency factor decided by the regulator who controls Transco’s revenues. The formula - RPI-X - was introduced in the mid-80s. That type of control and the regulation of profits in general was seen as a temporary means of ‘holding the fort’ until competition arrived. Developments in the price controls in both the gas and electricity supply industries - both now regulated by a common regulator - are being looked at.
Full competition in gas supply arrived in 1998, when every domestic consumer was given the opportunity to select a supplier of their choice. There is also competition in the field of gas connections and gas meter reading. OFGEM is proposing that metering will have its own price control, similar to that imposed on Transco.