Gas prices could fall, says Ofgem:
Gas prices may fall this winter as new pipelines start operating, the energy regulator Ofgem said today. The upbeat assessment from the Ofgem chairman Sir John Mogg contrasted with a government warning yesterday that Britain was heading into another winter of potential power shortages. The energy minister, Malcolm Wicks, said rising demand and plunging output from North Sea fields cancelled out the benefits of new gas pipelines from Norway and the Netherlands. But Sir John told the Financial Times that following assurances from Norway and the Netherlands about the completion of their pipelines, "we feel much more confident that the UK's gas supplies will be at a more comfortable level". With supplies from the North Sea dwindling, the UK is no longer an exporter of gas and now relies on imports. New pipelines were meant to relieve the pressure this year, but continental European companies have been slow to sell gas to Britain. Ofgem blamed the lack of a properly functioning European energy market for shortages earlier in the year.The rise in wholesale gas prices has led to higher prices for consumers. Ebico, a supplier of power to 10,000 customers, has become the latest company to raise its prices, with the gas tariff going up by 30% and electricity prices by up to 25%. Powergen earlier this month announced an 18.4% increase in gas prices, blaming the rise on an 87% increase in the cost of buying wholesale energy since the beginning of last year. The consumer group energywatch says Powergen has increased its gas prices by 47% this year and British Gas by 37%. The recent rises have pushed the average household gas and electricity bill to £1,000. But Ofgem, which is due to release an update on the outlook for gas supplies over the winter, said forward gas prices were starting to come down. "When wholesale prices go down, we will be looking at what suppliers will do," Sir John said, adding that Ofgem would take action if energy companies did not cut their bills when wholesale gas costs fell. Adam Scorer, director of campaigns at energywatch, said: "If the easing of gas supplies and improvement in infrastructure lead to a reduction in wholesale prices then energywatch expects energy companies to announce double-digit decreases with the same alacrity with which they imposed price increases." 29.8.06