UK industry minister denies gas supplies 'on a knife edge'

London (Platts)--15Mar2006

The UK was not on the brink of an energy emergency Tuesday, UK Secretary of State for Trade and Industry Alan Johnson said in Parliament after National Grid Monday issued its first ever gas balancing alert.

"I do not think that the country is on a knife edge," he said, according to Hansard records Wednesday. "Saying the country is on a knife edge is, I suggest, a wee bit of hyperbole." Johnson said that the gas balancing alert, the first since National Grid introduced the new warning system last November, was "an extremely important mechanism for telling the market that demand is exceeding supply." But the market responds to it. "We are not expecting a formal gas supply emergency," he said. Domestic, and the vast majority of industrial and commercial customers, were not threatened with a loss of supply, although the minister recognized the "impact" high prices could have, especially on industry.

The gas balancing alert was triggered Monday because National Grid forecast demand for that day at 380 million cubic meters, but expected supplies could only reach up to 377 million cu m for a sustained period of time. The imbalance was a fairly small one.

On Wednesday National Grid forecast total UK gas demand for Wednesday at 345 million cu m, with the weather milder. That lower demand level means that Wednesday, as Tuesday, no gas balancing alert is in force.

"Supply is meeting demand and the market mechanisms are working, albeit at a relatively high spot price," said Johnson. He also said there had been a similar warning system in the electricity sector for a number of years.

That system, under which National Grid issues Notices of Insufficient System Margin to alert generators when National Grid is worried that the safety margin of spare generation for a particular period is falling lower than National Grid would like.

National Grid has issued five NISMs this winter, the most recent on March 12. But they attracted very little public attention, unlike the huge media focus which resulted from Monday's gas balancing alert. The gas alert filled the front pages of national newspapers, but is in fact only a similar level of warning to a NISM, and those often go unnoticed except by those in the power industry.

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