Lattice drops price controls fight

GAS distributor Lattice has dropped its opposition to new price controls that could wipe £5 a year off the average household bill. The group said it would accept a five-year regime of price cuts imposed on its Transco gas pipelines network without an appeal to the Competition Commission.

Lattice said it could still maintain its dividend payout in real terms despite the new controls.

The group had threatened an appeal late last month, claiming the proposals from industry regulator Ofgem would leave it with a £1.9bn funding shortfall.

But in its latest statement it said a Commission probe would have left Transco and Lattice shareholders in limbo for up to nine months.

'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,' the group added.

The price regime, running from 2002 to 2007, means Lattice must accept 4% lower revenue next year and 2% less a year in subsequent years.

Lattice shares climbed 4% in early trade to 161p. City pundits said the decison had helped cleared the uncertainty that had clouded the stock this year. The shares 'had a bit of a run already yesterday, but I'd be surprised if there wasn't room for some more upside today,' said one analyst.