To reflect the steep rise in wholesale gas prices fully British Gas would have been justified in raising domestic bills by

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To reflect the steep rise in wholesale gas prices fully, British Gas would have been justified in raising domestic bills by nearly a half. The sting has been taken out of the latest warning of price rises by the fact that Npower and Scottish & Southern have already announced that their bills will be going up in January.Soaring wholesale gas costs, which make up about half the average domestic bill, affect all suppliers and have to be paid for by someone. That was because everyone else has been increasing their tariffs too Some were head of British Gas, some came later. It was no time at all before other suppliers were following Centrica's lead, and whacking up their own prices too.Gas users seem to have learnt from the experience.

Despite a 14 per cent increase in bills in September, British Gas suffered a net customer loss of only 160,000 in the second half of the year. Yesterday Centrica warned the 17 milllion customers of British Gas to expect yet another hefty increase in bills in the new year, and yet it provoked barely a whimper of protest.The best that Energywatch, the consumer watchdog, could come up with was a ten-point plan for saving energy this winter and an exhortation to energy suppliers to do all that they could to protect the elderly and vulnerable.How different from a year ago, when the consumer lobby went positively apoplectic over the increase in British Gas bills and called on customers to defect en masse.They did so Sir Roy lost more than one million accounts Yet for many of those customers, it made little difference. Talk about out of the frying pan, into the fire.As it happens Sir Roy is beginning to manage the thermal dynamics of the said frying pan which is Centrica with some skill. In such circumstances, the creation of a new state bureaucracy to manage the NPSS just looks like a monumental waste of money.Barely a protest as gas prices rise againThe heat is on Sir Roy Gardner, but not half as much as it will be next year when the chief executive of Centrica moves on to take charge at the can of worms otherwise known as Compass. Yet remove the regulatory burden, and the private sector may well be able to reduce fees to something close to the 0.3 per cent annual management charge envisaged by Lord Turner for his NPSS.Arrangements put in place for stakeholder pensions, which all employers are obliged to offer, mean that the systems for providing just such a private sector solution to the problem already exist. By setting the employers' contribution at 3 per cent, Lord Turner assumes the scheme will be able to bypass this high cost regulation.

No one could claim they had been mis-sold their pension when, taking account of the tax break, they are getting about half the money contributed from someone else. Ergo, costly FSA sales regulation wouldn't need to be applied.What then would become of private pension provision? In all but the cases of large occupational schemes and high income individuals, it might find itself at such a competitive disadvantage that it couldn't possibly co-exist. Just look what's happened with tax credits, where the taxpayer has had to fork out billions for overpayments which the revenue now finds impossible to recover.As it happens, the main cost in pensions provision as it stands is that of sales regulation, or ensuring that the product is being appropriately sold. Meanwhile, a massive new bureaucracy and IT system would need to be set up to administer and keep checks on the millions of individual accounts the scheme would create.Anyone who has had to deal with the tax authorities, where tax codes are wrongly allocated all the time, necessitating months of correspondence and costly corrective action, knows that an efficiently run, low cost NPSS is extraordinarily unlikely. Keep the fees to a bare minimum and the accumulator effect of saving over many years should be capable of delivering a worthwhile pension in retirement even to those contributing quite small amounts of money.Yet I doubt in practice that the costs would be as small as Lord Turner anticipates.