08-10-04
Energy regulator Ofgem wants the European Commission to investigate the
continental gas market to see whether firms are preventing gas from flowing to
the UK where prices are now at record highs. Ofgem's inquiry into allegations of
abuse in the UK gas market had uncovered "strange behaviour" in the
gas industry in The Netherlands, Belgium and Germany, CEO Alistair Buchanan
said.
"We found strange behaviour in the near continent that has led us to take
our findings to the [EU's] competition directorate which has been very
receptive," Mr Buchanan said. "We will work closely with the
competition directorate and other national regulators to pursue any potential
breaches of competition law."
But financial watchdog the Financial Services Authority said its parallel
inquiry into soaring prices last winter had not found any evidence of
manipulation of the gas trading market, the largest in Europe. Britain imports
gas from the mainland through a sub-sea pipeline with Belgium. Ofgem said
increased imports would have lowered UK wholesale gas prices which have jumped
more than 50 % since 2003.
Since market reforms in 1996, wholesale gas has been traded like any other
commodity. Suppliers buy gas to meet the needs of homes and businesses. But the
market price has been rising, resulting in costs up £ 3.6 bn in the past year
and triggering bill increases for millions of UK users.
Ofgem launched a probe at the end of last year to investigate the reasons for
the change. In its report it concluded that 30 % of the recent rise is due to
high oil prices in Europe. Wholesale gas prices in continental Europe have
traditionally been linked to oil prices.
The system impacts on the UK when the country needs to import gas during the
winter months. The other major reason, accounting for 12 % of the price hike, is
declining UK supplies, according to the report. Ofgem found winter gas supplies
had fallen faster than the market had expected. While the situation does not put
supplies at risk, it requires more expensive imports.
There are a large number of less significant reasons for the rise, such as
the cost of storing gas. But industrial consumers, who had alleged market
manipulation, said the report did not explain the surge in UK prices.
"We are astonished it has taken so long to come to an unimpressive
conclusion," said Jeremy Nicholson, of the Energy Intensive Users Group,
whose members include steel, glass and ceramic manufacturers. "It doesn't
begin to explain the level of gas prices in the UK... and fails to address why
we are paying more here for gas than on the continent."
Ofgem said it wanted Brussels to look into whether surplus gas on the mainland was made available for import into the UK and if the decision by several European companies to put gas into storage rather than sell it into the UK was reasonable.
A further issue is whether companies made surplus capacity on European pipelines
available to bring gas across to Zeebrugge, the Belgian end of the sub-sea
pipeline. Ofgem added that it was continuing to investigate contracts relating
to fields flowing into Bacton in Norfolk to see why gas that was available did
not flow into the UK market.
Source: The Scotsman