The new price control covers the five-year period from 1 April 2002.
After giving full consideration to Ofgem's challenging proposals, the Board believes that by making an early start on the planned restructuring of Transco the regulatory contract can be delivered without unacceptable risks. Accordingly, the Board believes that Lattice will be able to maintain the current level of dividend in real terms.

A Competition Commission Inquiry would have resulted in a period of six to nine months of uncertainty for all Lattice's stakeholders.

The British gas industry today faces a period of unusual change and uncertainty. The Government is undertaking the Energy Policy Review, the Health and Safety Commission is carrying out its Fundamental Review of Gas Safety and the tax regime affecting the Company is also under review. In addition, the Government's pilot scheme for lane rental charges also has the potential to impose significant additional costs on Transco. Assurances have been sought from Ofgem that if developments in any of these areas led to material additional costs for Transco, then Ofgem would be prepared to re-open the price control. The extent to which Ofgem's assurances have mitigated the risks borne by Transco has contributed to the Board's decision.

Further details of Transco's plans for organisational change and performance improvements will be given with the announcement, next February, of the Lattice Group's Final Results for 2001.

Acceptance of the final proposals remains subject to agreement between Transco and Ofgem on the detailed amendments to the Gas Transporter's Licence and the proposed framework for System Operator incentives needed to bring the proposals into force.

NOTES TO EDITORS

Transco - part of Lattice Group plc - is the owner, operator and developer of the majority of Britain's gas transportation system. Its network supplies almost half the country's energy needs.