Transco welcomes Ofgem's confirmation that the pre-1991 component of the Regulated Asset Base would be left unchanged (the so-called 'unfocused' approach), and that the issue would not be re-opened.

Nonetheless, the other aspects of Ofgem's Initial Proposals are considerably different from Transco's strategic business plan (SBP), which is based on a £5 billion programme of investment and renewal. In particular, the proposed level of operating expenditure appears to be significantly out of line with the SBP. The treatment of replacement expenditure remains unresolved. In addition, Transco's view is that the rate of return proposed by Ofgem is insufficient to fund an investment programme of this scale.

In responding to the Initial Proposals, and in continuing discussions with Ofgem, Transco will be seeking an outcome to the review which enables it to provide the required standards of safety, supply reliability and customer service, as well as adequately remunerate its providers of equity and debt.

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.

The new Transco price control is due to come in to effect in April 2002. Ofgem is due to publish its final proposals in September 2001.