Energy firm E.On has announced it is closing a call centre and cutting 450 jobs across the UK. The company said it would close its call centre in Uddingston, Lanarkshire, with the loss of about 40 jobs. The majority of the other redundancies would be at two offices in Coventry, two offices near Nottingham and at offices in the Dudley area. It said most of the cuts were in the retail division, which had not made a profit for two years. It said it hoped most would be voluntary redundancies and would seek further cuts by not filling vacant posts over the coming months. The energy services, branded communications and business services departments will also be hit.

The union Unison said 50 jobs would be lost at its offices at Newland House and Sherwood Park, near Nottingham. The competitive market system is fatally flawed, benefiting neither customers nor employees. The firm, which employs about 18,000 people in the UK, said the majority of other cuts would be at its headquarters in Westwood Business Park, Coventry, and the adjoining Greenwood building. Dr Paul Golby, chief executive of E.ON UK, said: “These redundancies are part of an ongoing process that we started last year to ensure that we have a sustainable retail business in the UK, especially considering that we’ve now made a loss in retail for two years in a row.

“This was clearly a difficult decision to make and not one that we’ve taken lightly, but we firmly believe that it’s the right thing to do for the company as a whole. “I can also assure all of our customers that they remain our number one priority and I am certain that today’s move won’t affect the service we provide to them.” Dave Prentis, Unison’s General Secretary, said the cuts showed no sector of the economy was immune from the recession. He said: “While customers struggle with high water and energy bills, utility companies are making staff redundant. “The competitive market system is fatally flawed, benefiting neither customers nor employees.”

He said the government and the regulator Ofgem should review the operation of the energy market. Donna Merriman, the union’s officer for staff at E.ON said: “Unison is working closely with E.ON to make sure all those facing redundancy are given the support they need to find another job. “We will be working hard to keep the human costs of these redundancies to a minimum.”

British Energy has restarted three nuclear reactors over the last three days, including one that had been closed for repairs since 2007, a company spokeswoman said on Monday. The 605-megawatt Hartlepool 1 reactor in northeast England was restarted on Sunday, a day after the 625-MW Heysham 2-8 reactor in northwest England was restarted. “Hartlepool came back about 1830 GMT yesterday,” the spokeswoman for British Energy said. Hartlepool had been shut for repairs since autumn 2007 and Heysham 2-8 was shut for planned maintenance on Jan. 15, 2009. Hartlepool 1 was producing about 40 MW by 1100 GMT on Monday, while output from the unit at Heysham was around 265 MW, according to data from National Grid. British Energy’s Dungeness B22 unit was at 50 MW out of a maximum 555 MW, after restarting early on Monday morning. British Energy said the other three reactors that have been shut for repairs since late 2007 should reopen soon. “The company expects to return the other reactor at Hartlepool power station and the two reactors at Heysham 1 power station to service in a phased process over the coming weeks,” British Energy, which has recently been bought by France’s EDF , said in a statement.

British Gas has said that more than seven million households will benefit after it cut its standard tariff gas prices by 10%. The move, which comes into force on 19 February, will trim £84 from the average annual gas bill, it added. But observers said that even if rivals followed suit, it was “too little and too late” to make a significant difference to winter fuel bills. The firm’s price cuts will not apply to those on fixed tariffs.

British Gas, which is part of the Centrica group and trades as Scottish Gas in Scotland, raised its gas prices by a record 35% in 2008, while other companies lifted prices by more than 20%. At the end of last year the “big six” energy companies were urged to pass on lower wholesale gas prices. British Gas managing director, Phil Bentley, said the firm understood that energy prices were a “significant” part of their customers’ outgoings. Will British Gas and the like who pushed their customers for three-year fixed deals last summer help those who signed up to higher prices? “We are committed to providing the best possible prices for customers,” he said. “This price cut will go some way to helping customers manage their budgets, and we will continue to do what we can, when we can.”

Watchdog Consumer Focus welcomed the price cut, saying British Gas had “done the right thing”. But chief executive Ed Mayo added: “There are millions of dual fuel and electricity only customers that will not see a penny off their bill. “We will now turn the heat up on the other five companies that are keeping prices sky high.” It’s going to give some customers a bit of respite at a time of year when they are are going to be spending significant amount on heating their homes.

As freezing temperatures sweep through the nation, has the energy war in Russia left us all out in the cold? And will we be faced with higher energy bills? It was just a glimmer of a hope, but it was a hope all the same. Scottish Power’s recent decision to cut the cost of one of its fixed-rate gas products by 10% led to speculation that other suppliers would quickly follow suit.

Lower energy bills at last, perhaps? But alas, it was not to be.

Amid an energy dispute between Russia and Ukraine, Russia decided to cut off all gas supplies to its neighbour, causing major supply disruptions across Europe. And leaving us all to wonder what impact it will have on us.

Just three years ago, Russia and Ukraine were caught up in a similar gas row which lasted four days and resulted in utter turmoil for European gas supplies. Worryingly, the current dispute has already lasted longer than this.

Gas markets have reacted nervously to the latest news, and wholesale prices have started to rise. This, in turn, could affect how much we pay for our energy in the UK.

What will happen to our energy prices?
Much will depend on how long the dispute lasts. The longer it drags on for, the slimmer the chance of lower gas and electricity bills. After all, the row provides a convenient excuse for utility providers to hold onto their margins and keep prices high.

Some utility providers had previously indicated that energy prices would start to come down in the new year. But this was conditional on further, sustained falls in the wholesale price of energy, and that’s now looking less and less likely.

While I don’t think prices will go up, any move by suppliers to lower their prices is now likely to be postponed. Exactly how long this delay might be is anyone’s guess, but I don’t think we’ll see any change until the spring at the very earliest. Even then, price cuts may not be as great as initially hoped.

Energy Secretary Ed Miliband has tried to offer some reassurance, reasoning we shouldn’t worry about our gas supplies as they can be obtained from a range of sources.

But even if our supplies aren’t affected, wholesale prices may still go up, preventing energy providers from lowering their prices.

Wholesale prices for energy have eased away from the extreme highs of 2008, raising expectations of price cuts on gas and electricity in the UK. Consumer groups and the government alike have begun calling for a reduction in domestic gas and electricity prices, creating a widely-held belief that such cuts are imminent.

Yet while the hopes of such cuts remain alive, dark clouds have begun to gather which might result in the delay, reduction, or cancellation of any planned price cuts.

The Russian prime minister recently said that “despite the current problems in finances, the era of cheap energy resources, of cheap gas, is of course coming to an end.” Oil prices up on Russia’s announcement

In other words, the most powerful man in Russia is determined to keep high the price of his country’s energy resources. This determination is already being played out: using the pretext of a billing dispute with Ukraine, Russia last week cut off gas supplies to Ukraine. The unresolved dispute is significant, as Ukraine hosts a major gas pipeline that connect Russia’s gas fields with the west.

Quite predictably, the dispute has already resulted in major supply disruptions amongst many European countries, prompting a leading German supplier to state that its gas supplies via Ukraine had been “massively reduced”, going so far as to predict that deliveries would completely stop in the next few days.

But even beyond the current winter term, there are other powerful challenges which will translate into permanently high prices for gas and electricity.

The price of gas has historically followed the price of oil, not least because many oil fields also produce natural gas as a by-product. The world’s leading gas producers (Russia, Iran and Qatar account for 60% of world natural gas production) have over the last two years set up a new OPEC-style gas cartel. This new organisation will give its members the power to decouple the price of natural gas from oil.

The creation of a gas OPEC illustrates how energy-exporting countries have tightened their control over pricing in recent years, thus making a return to cheap energy highly unlikely. And because the UK uses natural gas to produce 40% of its electricity, prices there will continue to rise too.

The UK government needs to secure the long-term supply of energy to the UK, without sacrificing the environment. Renewable energy and nuclear power therefore loom large in the government’s energy policies. Creating clean new energy generation capacity is necessary, now that the UK’s own North Sea resources are declining. the extremely high cost of diversifying the UK’s electricity generation capacity will be paid for by the UK energy consumer through rising bills for decades to come.

After record price increases in 2006, energy suppliers in early 2007 trumpeted price cuts between 10-15% on the back of falling wholesale energy prices. But with 2007 wholesale prices off of their 2006 peak by as much as 65%, it is safe to say that suppliers made token (and short-term) price cuts only. The balance of the benefits found its way into the pockets of the suppliers, who all announced blockbuster profits in 2007.

The simple lesson is that there will be no letup to rising energy prices for the coming years if not decades:
- Those countries who give us our energy have gained control over the price at which they sell it.
- To reduce our dependence on energy imports and to generate clean electricity will cost astronomical amounts of money.
- Energy suppliers are businesses, not friends.

British gas prices jumped on Thursday on fears Russian gas supplies to Europe will not resume for some time and rumours of Norwegian production problems, but eased back a little later when Norwegian exports rose again. Gas for Friday rose to a high of 72 pence per therm, up more than 12 pence from day-ahead prices in the previous session, before easing to 66.50 pence, while the working days of next week surged 8 pence to 69.50 pence, off earlier highs of 71.25. “People worry now it may take a long time before Russian supply resumes. And stocks are withdrawn,” a trader said. “There’s also talk there’s some production problem in Norway.” StatoilHydro denied it was facing a production problem at its Aasgard gas field in the Norwegian Sea or elsewhere due to rough weather. Flows of fuel from Norway into eastern England fell sharply on Wednesday, according to data from British gas network operator National Grid, but shot up again around 4:30 p.m. British time. The sudden increase in flows from Norway helped push down prices late in the day but colder weather forecast for next week provided some support, a trader said. February contracts ended around 1.75 pence higher than Wednesday’s at 63.75 pence, off earlier highs of around 69 pence, while the summer 2009 contract ended down about 0.35 pence at 47.50 pence after hitting 52.30.

The shorter term price increases followed a rally on Wednesday amid uncertainties about when Russian supplies would reach Europe again and fuel stocks dropped as a result of the dispute. The row continues to disrupt supplies to many countries in continental Europe, forcing factories to shut down and leaving householders shivering in bitter winter cold. The Russian and Ukrainian prime ministers are to meet on Saturday in the latest attempt to resolve the gas row that has cut back supplies to a freezing Europe.

“The longer the dispute … drags on and the longer Europe stays without gas flows from Russia, the more concerned the market is getting,” said another trader. “With LNG stock diminishing, mid-range stocks diminishing, we are getting very susceptible to cold snaps … We are shorting to the continent.” The UK continued on Thursday to export gas to Belgium and on to the rest of Europe to help cope with the Russian supply cut.

BP’s British Sapphire LNG tanker arrived at Isle of Grain terminal on Thursday, which should help replenish part of depleted stocks for covering winter demand. In the power market, prices went up as more power plants shut down, including Heysham 2-8 nuclear power reactor. Power network operator National Grid issued warnings the UK power supply cushion for Thursday afternoon looked too tight. It put the system margin shortfall at 650 megawatts for 4 p.m.-8 p.m. British time. Baseload electricity for Friday stood at 61.50 pounds per megawatt hour, up from around 58.50 pounds of day ahead late on Wednesday. February rose more than 3 pounds to 59.25 pounds and the summer 2009 climbed 3.25 pounds to about 49.75 pounds, according to one broker.

“The prompt looks firm into next week,” said one trader.

Domestic energy prices unlikely to fall until autumn…

January 2009:

One of the UK’s largest independent energy consultants says hopes of energy cuts this spring are now fading and any anticipated cuts are likely to be delayed until autumn.

With the country descending into a cold snap millions of households will endure a winter of fuel poverty as the current cold spell continues.

Householders were hit by two price increases for gas and electricity during 2008. The average dual-fuel bill now tops £1,000 a year – £300 more than it was a year ago and with bills going up an average of 40% since January last year.

And some people will be too frightened to put the heating on right now, worried about these extra costs.

But since their peak last summer wholesale energy prices have been coming down, but volatility in the energy markets has never been higher as supply and demand plays a major factor in the market prices and any sustained cold weather will have an immediate impact on the market price.

The prices have fallen as new projects to import gas have eased concerns about a supply gap caused by sliding output from the ageing North Sea fields and the cost of wholesale gas is linked to the price of oil, which has dropped dramatically since its peak last summer.

But recent demand in Britain has increased due to freezing conditions and the row between Russia and Ukraine has made the market more volatile.

The price that we pay for electricity is largely dictated by wholesale electricity prices. As approximately 40% of UK electricity generation comes from gas-fuelled power stations then wholesale electricity prices are in turn obviously affected directly by the wholesale price of gas.

But domestic energy is bought through a variety of long and short-term contracts, which means there is a time lag between changes in wholesale prices and changes in domestic prices.

Chris Hurcombe, of Catalyst Commercial Services, said yesterday “That any anticipated price cuts, are likely to be delayed until the autumn”. He said: “With wholesale energy costs falling since the highs of last summer, domestic prices were expected to come down in the spring, but recent development means we are unlikely to see any reductions until later this year”

Hurcombe concluded “We are likely to see price cuts of between 10 and 15%, however any price cuts will be too little to late and it would be better if the supply companies could find a way of cutting prices when people need the energy most during the winter periods”

Demand in Britain has risen due to freezing conditions, but traders switched from importing to exporting gas as many continental European countries run short because of the row between Russia and Ukraine. The move means Britons are likely to be denied long-awaited cuts in fuel prices. The wholesale cost of gas has increased by 26 per cent in three days, hitting 73p a therm.

Energy consultants Inenco said there was now little hope of providers dropping their charges. Spokesman Ian Parrett said: “We are not experiencing supply shortfalls in the UK but the markets are already responding with higher prices. “With future dependence on imported gas, Britain needs to make energy security a key priority or risk being held to ransom.”

Ukraine’s gas company Naftogaz said Russia’s Gazprom has cut natural gas supplies to Europe by about two-thirds. Poland, Germany and Hungry were all expected to be hit by the shortage. E.ON, which has almost 3 million gas customers in Britain and part-owns the interconnector pipeline between Britain and the continent, said the pipeline had turned from being a net importer to a net exporter of gas due to the shortages in Europe.

• In the UK our gas storage capacity is woefully inadequate, currently allowing us to provide for only 15-20 days. By comparison, France’s capability is 122 days and Germany’s is 99 days.
• The current spat between Russia and the Ukraine over gas supplies should raise alarm bells in the UK. Although we import minimal gas supplies from Russia (2-3%), dependency on imports is likely to grow and our own reserves die out.
• The ongoing Ukraine Russian issue with regards to the exportation of gas to the European market has moved ahead this evening with traders pushing up the price of UK gas as a means of filling the growing shortage across Europe. This will mean that UK energy providers will need to pay more for their gas in the wholesale market and effectively kill stone dead any chance of reductions in UK gas bills in the short to medium term.

Twelve European countries are now without any gas from Russia after Austria, Slovakia and the Czech Republic announced this morning that their supplies had halted altogether. Slovakia declared a state of energy emergency.

The three join Bosnia, Bulgaria, Croatia, Greece, Hungary, Macedonia, Romania, Serbia and Turkey as the effects of Moscow’s bitter row with Ukraine over gas payments inexorably spreads westwards.

France, Italy and Germany have already reported that their supplies from Russia are markedly down.

Gazprom, the Russian state gas monopoly, confirmed today that it had cut the amount of gas it was shipping to Europe through Ukrainian pipelines by a further 21 million cubic metres – the amount of gas, it said, that Kiev had stolen yesterday from the supplies intended for Europe.

In an exchange of recriminations, Alexander Medvedev, the deputy chief executive of Gazprom, said however that it was Ukraine, not Russia, which had shut off the flow of gas to Europe altogether. “Unfortunately the situation is continuing to deteriorate,” said Mr Medvedev. “Yesterday night Ukraine completely shut down all export pipelines to Europe via Ukraine.”

He warned that there was a growing risk that the empty gas pipes would be damaged by cold.

But the Ukrainian gas company blamed the Russians. “Russia stopped all transit through Ukraine” at 7:44 am (0544 GMT), said Naftogaz spokesman Valentin Zemlyansky. “Russia has left Europe without gas.”

Viktor Yushchenko, the President of Ukraine, wrote to his Russian counterpart Dmitri Medvedev demanding that Russia resume full gas supplies, pending a settlement of the payment row.

In Britain there were increasing concerns that families could be forced to pay more than expected for their gas and electricity. The “big six” energy suppliers — British Gas, ScottishPower, Scottish and Southern Energy, EDF Energy, npower and E.ON — had been widely expected to cut their retail gas and electricity prices over the next few weeks by about 10 per cent, reflecting a marked drop in the wholesale price of gas last autumn.

British wholesale prices leapt sharply yesterday, though, as Russia’s decision to withhold gas from Ukraine over unpaid bills and an unsigned contract for 2009 grew into dire shortages farther down the pipelines that take 36 hours to pump gas across the vast former Soviet country. Italy reported a 90 per cent cut in its Russian gas, France a reduction of 70 per cent and two importers in Germany said that they had serious shortfalls.

Most countries have stockpiled several weeks’ supplies after two mild winters and experience of a similar dispute between Moscow and Kiev in 2006. That row lasted three days but the latest disagreement, which started on New Year’s Day, seems to be far from over. There was one glimmer of hope when the head of Ukraine’s gas company agreed to go to Moscow for talks tomorrow with Gazprom, the Russian state-controlled monopoly gas supplier.

The EU broke from its diplomatic approach to demand a resolution to the crisis. “Without prior warning and in clear contradiction with the reassurances given by the highest Russian and Ukrainian authorities to the European Union, gas supplies to some EU member states have been substantially cut,” the EU said.

“This is completely unacceptable. The Czech EU presidency and the European Commission demand that gas supplies be immediately restored to the EU and that the two parties [Russia and Ukraine] resume at once negotiations with a view to a definitive settlement of their bilateral commercial dispute.”

Around Europe, both Russia and Ukraine are being blamed for the worsening situation. In Bulgaria, which relies almost completely on Russia for gas, the Prime Minister said that there was only one week’s supply left in reserves and appealed for industry to cut usage. The President even proposed that an ancient nuclear power plant, closed as a condition of Bulgaria joining the EU because it was deemed too dangerous, should be switched back on. Romania, which has supplies for over a month, nonetheless today declared a state of emergency.

Turkey was seeking gas from Iran, and Croatia introduced rations for industrial users to maintain domestic supplies. Austria said that it had three months’ reserves but called an emergency meeting at its Economy Ministry.

Gazprom has demanded a large price increase for 2009 and says that payment for November and December has not been fully received. It said that it supplied 65 million cubic metres (mcm) to Europe yesterday through Ukraine, a fall of 78 per cent from the 300 mcm that it had been supplying since the dispute started.

The Department for Energy and Climate Change at Whitehall called for Moscow and Kiev to urgently work to resolve the dispute. “We back the European Union’s call for gas supplies to be restored immediately and that both parties restart negotiations with a view to a speedy resolution of this commercial dispute,” a statement said. The department said that less than 2per cent of gas was imported from Russia and that it did not expect British supplies to be affected. Around 40 per cent of the gas used in Britain will be imported this year, up from 27 per cent in 2007.

That proportion is expected to rise to 75 per cent by 2015. Most of these imports come via pipelines from Norway and Holland. Britain is also able to import liquefied natural gas via ships to terminals at the Isle of Grain in Kent and Milford Haven in Wales.

Gas and electricity firm chiefs were today told, Cut your prices now. The calls for immediate cuts came as the credit crunch and the big freeze tightened their grip on the Fylde coast. Wholesale oil prices are falling but so far Scottish Power is the only one of the so-called “Big Six” energy providers to drop its prices after cutting one of its tariffs by 10 per cent. However, the reduction was today labelled “pathetic” by cash-strapped Fylde residents, many who say they are too frightened to put on their heating during the current sub-zero temperatures. One community leader even said she feared the UK was returning to a Victorian age where elderly people froze to death in their own homes. Several energy companies told The Gazette they did have plans to cut their prices – but not until later in the year. Gwen King, chairman of Queens Park Residents’ Association, said: “There are people on this estate who are too frightened to put the heating on right now. “They sit there in the cold because of how much it costs. “We’re seeing a return to Victorian times where people are freezing to near death. “But why should one energy company have the right to cut its tariff while the others don’t? “Ten per cent is pretty pathetic. I would say 15 per cent across the board would have been a much better option.” UK households were hit by two price increases for gas and electricity during 2008. The average dual-fuel bill now tops £1,000 a year – £300 more than it was a year ago Wholesale prices for gas and oil have fallen globally by 40 per cent since their peak last summer. While this is being reflected in reductions at petrol filling stations many people are struggling to meet household fuel bills. The Gazette reported earlier this week how the current cold snap was a potential killer for some of the most vulnerable members of society. Nick Ansell, debt advisor at Blackpool Citizens Advice Bureau, said: “The average benefit claimant is on around £60 a week and almost half of that goes on keeping themselves warm. “Any move to cheapen energy prices is to be welcomed, but I think they should be doing more seeing as the wholesale price has come down so much. “The problem they have is that these companies are answerable to shareholders and they want to see profits so they will continue to charge more.” The reduction by Scottish Power means users on its Price Sure plan will see a drop in their annual bills by around £81.

Joan Humble, Blackpool North and Fleetwood MP, said the reduction was “a step in the right direction”, but added: “I don’t think it goes far enough. “With this recent cold weather more people on the Fylde will be using a lot more energy and therefore paying more in the coming months. “These people need help and while a 10 per cent cut from Scottish Power will help, it won’t help everyone.” Fylde MP Michael Jack added: “The regulator needs to have more clout and show its teeth in this ultra-competitive market.

From the public’s point of view this cut will be welcomed, but this also needs to be reflected across the board. Fuel poverty is a big issue in parts of the Fylde which needs to be addressed more coherently.”

Ian Parrett of St Annes-based energy analysts, Inenco, which five years ago called for a Government inquiry into fuel price tariffs, said: “The current issues in the gas supply market highlights the concern we have over the reliability of supply.

“We wouldn’t expect to see prices dropping markedly in this time of uncertainty.

“There is still a perception the ‘Big Six’ energy companies are not as competitive as they could be and there does seem to be scope for further reductions without placing the risk factor of a fixed price onto customers.” As for the companies themselves, bosses told their customers to sit tight.

A spokesman for British Gas said: “We hope to be in a position to cut our prices this year, if wholesale energy markets allow.” Dr Paul Golby, chief executive of Eon, said: “If we continue to see falling wholesale electricity and gas prices, we’d hope to reduce customers’ prices as soon as we are able.

“We’re obviously very aware of the difficulties our customers are experiencing, especially considering the current economic problems, and we’re monitoring wholesale prices closely in the hope of making this move.”

A spokesman for NPower said: “If there is a significant and sustained fall in wholesale energy prices we will look to review our retail prices. “The reality now is that gas wholesale prices continue to be very high – more than 50 per cent higher than at the beginning of 2007. “During the same period, retail gas prices went up by only 27 per cent.

“We have therefore absorbed a huge amount of this increased cost in an effort to protect our customers.”

And EDF Energy said: “EDF Energy fixed priced products are currently among the most competitive on the market.

“We firmly believe these tariffs offer customers protection and security in a volatile market.”