UK Gas Prices Could Rise:

Catalyst Commercial Services Ltd — Tue, 02 Oct 2007 22:52:33 +0000

Fears have been raised that UK households could suffer from higher gas bills this winter, after a fresh row broke out between Russia and Ukraine, threatening the supply of gas to Europe. Gazprom, the Russian gas monopoly, announced that it will cut gas supplies to neighbouring Ukraine unless a £650 million bill is paid this month. “Bearing in mind the approaching winter season and higher demand for gas, as well as the Ukrainian repeated failures to fulfil gas contracts, Gazprom will have to reduce gas deliveries to Ukrainian consumers if the debt is not settled in October,” the company said. The threat is reminiscent of an almost identical row between the countries two years ago. At the time Gazprom shocked the world by carrying out its threat and turning off its supply. Gazprom produces half the gas used by European Union countries, with four-fifths of that passing through pipelines crossing Ukraine. Though the UK only imports 2 per cent of its gas directly from Russia, it was estimated that British gas customers had to pay £1 billion more for their gas during the spring of 2006 as a result of the supply problems in Europe. Gas companies have refused to rule out a possible gas price rise this winter. A spokesman for Centrica, British Gas’s parent company, said: “We have no plans to rise bills between now and the end of the year but we are all looking at how winter pricing turns out. This [the Gazprom row] potentially adds to upward pressure.” Britain has become increasingly reliant on gas imports, some of which comes indirectly from Russia, in recent years. In 1990 gas accounted for just 1 per cent of our electricity generation. That figure has risen to 40 per cent. The average British Gas customer had to pay over £1,000 for their energy bills in the spring of 2006, which the company blamed on soaring wholesale gas prices. Gas bills have subsequently fallen, though remain higher than they were before the winter of 2005/2006. Experts said that even if the row between Russia and the Ukraine escalated, Britain was in a better position to cope than two years ago. Since then, a major pipeline has been connected between the UK and Norway, which can now supply 15 per cent of the country’s gas needs. Greater storage capacity in Milford Haven has also recently been open, which will allow gas companies to stock up on liquified natural gas, which can be shipped in from the middle east. However, though Britain is less reliant on continental Europe than two years ago, there are concerns that gas bills will increase anyway this winter. Temperatures are due to be far cooler than last year’s very mild winter, and the price of oil which has big impact on the price of gas is touching record highs. Richard Frost, at nPower, said: “Nobody has set their gas bills in stone. The truth is nobody knows just how things will pan out this winter. Gas is increasingly an international market.”

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UK Gas Prices Could Rise:

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