UK warned of energy price rises

British households faced the threat of further increases in energy bills today after a regulator warned that gas supplies could be even tighter this winter.

British households faced the threat of further increases in energy bills today after a regulator warned that gas supplies could be even tighter this winter.

Ofgem said the wholesale price of gas for the coming winter was higher than the level seen last year, “reflecting uncertainty over imports”.

It also warned that large industrial operations would again play a “crucial role” in balancing demand and supply over the colder months.

Households and industrial users were hit by sharply higher bills over the winter when inflation-busting rises were imposed by suppliers across the UK.

The crisis saw wholesale gas prices quadruple to as high as 255p a therm in one day in March when National Grid was forced to issue its first ever warning that demand was outstripping supply.

It came as supplies to the UK from the North Sea and Europe struggled to keep up with demand during a cold snap.

Following consultation with National Grid, Ofgem today said supplies could come under even greater pressure this winter if projects to boost gas imports are not completed on time.

The projects include the expected reopening of Rough, the UK’s largest gas storage facility, on June 1 following a fire in February which put it out of action hitting supplies.

The key interconnector pipeline which brings gas to Britain from Belgium is also being upgraded.

For long periods of last winter it was not running at full capacity, prompting fury in the UK.

Ofgem chief executive Alistair Buchanan warned: “While there is a possibility that supplies will increase if the new import projects are built on time, Ofgem believes that industry should adopt a cautious approach, as there is no room for complacency.

“Major infrastructure projects can be delayed and as we saw last winter, new pipes and terminals are not always used at full capacity to import gas.

“Lack of transparent information about gas supplies and storage from Europe and elsewhere in the world remains a significant problem. This makes it very difficult to predict the level of gas imports into Britain.”

He said voluntary cuts in consumption by big gas users would again play a “crucial role” in balancing demand and supply this winter and added: “National Grid’s report shows we potentially face another winter of tight gas supplies.”

Ofgem said it is holding a series of meetings with companies which could import gas into Britain.

But energywatch chief executive Allan Asher said: “Sadly it is going to have the inevitable impact of upward pressure on prices and worse still huge pressure on the fuel poor.

“It is a sad thing that an extra million people have been kicked into fuel poverty over the last year and that might happen again this year.

“We are still facing these double-digit price rises which we have had recently and will have again.”

Last winter, the European Commission and Ofgem said the lack of open access across continental energy markets had been a key factor behind the shortfall of supplies to the UK.

The Commission today said it is to take action against Distrigas regarding anti-competitive gas contracts in the Belgian market.

Launching a new Business Energy Forum today, Trade and Industry Secretary Alistair Darling said there was a “compelling” economic case for speeding up planning decisions on new gas storage facilities as low-income families are hit by price hikes resulting from shortages.

He also gave a warning about next winter’s energy supplies, telling BBC Radio 4’s World at One: “I think it will be tight. But I think, provided we can take the same approach we took last year, working closely with energy suppliers and with industry, then we will be able to deal with the challenges we face.”

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