The regulator said it would publish proposals to open up gas metering to competition on Monday and would investigate accusations of anti-competitive action against British Gas.

Opening up metering to competition would lead to further improvements in gas services to consumers, Ofgas said.

British Gas is now split into two: Centrica, which trades under the name of British Gas and supplies gas to customers; and Transco, also known as BG, which maintains the gas pipelines.

Transco split

British Gas feels the heat

Ofgas proposals include splitting Transco's different functions into separate businesses and splitting the regulator's price controls to match.

Three distinct business lines, gas transportation, metering and meter reading, would be created.

Alternatively, Transco's metering assets could be auctioned off to other players in a different approach to introducing competition.

"In a competitive market, companies will be able to choose the package of services that appeal to different types of customers, and will continually seek to deliver the required services at the lowest possible prices," said Clare Spottiswoode, Director General of Gas Supply.

Competition threat

Meanwhile, Ofgas has said that continuing dominance of the newly-deregulated supply market by British Gas is a threat to competition.

While 15% of gas-using UK households have switched suppliers, the ultimate success of competition relied on British Gas not taking unfair advantage of its position, Ofgas said.

Ofgas will scrutinise British Gas's 'dual fuel' gas and electricity offers, its marketing offers designed to complement gas sales and heavy advertising strategy.

It will also look at the way British Gas transfers of customers to new suppliers.

3m switch

Ms Spottiswoode said: "So far well over 3m people have chosen to take their gas from a supplier other than British Gas and the number is growing at around 20,000 a day, all of whom are able to make substantial savings on their annual gas bill."

Savings on bills of up to 20% have been enjoyed by many of those deciding to shop around for a better deal.

However, competition has benefited both customers who have changed supplier and those who have stayed with BGT, Ms Spottiswoode said.

British Gas "disappointed"

In a statement, British Gas managing director Mike Alexander insisted the company was not taking advantage of its position as a major supplier and was "disappointed" to learn that Ofgas intends to investigate 'dual fuel' discounts.

"This is no longer about gas competition, it's about energy competition and any investigation must look at both gas and electricity markets," he said.