AS GAS prices soared way above levels on continental Europe last winter amid fears that we might even have a shortage, Alistair Buchanan, chief executive of energy regulator Ofgem, was left scratching his head in disbelief. The big mystery was why were European energy companies not exporting gas through a pipe called the interconnector, which links Britain's gas network with the Continent's, to make a killing by selling at our higher prices.

"You're left looking at this saying, 'What is going on?' No other business given that opportunity would turn it down,'' said Mr Buchanan in a slightly exasperated tone.

"Each time we came up to looking at what was potentially happening over the interconnector we were just dumbfounded.''

So he asked executives at some of the European companies to help him understand why they were not pumping the gas through.

"They said, 'Oh you British, you're absolutely stupid. Didn't you understand that upgrading the pipeline to Zeebrugge isn't all you have to do?

"You then have to upgrade the pipeline within Belgium and within France to be able to carry the gas.'''

Not only was the answer far from complimentary, it was also untrue. Within a few weeks of the New Year the interconnector was flowing at almost double the level before Christmas. Pipelines don't get upgraded fast enough for that sort of turnaround. "In other words that story was complete bunkum,'' said Mr Buchanan. "[There are] just bizarre explanations as to what is happening within Europe.'' So had he been lied to? "I'm not saying that was done out of malevolence, maybe it was said with a genuine view,'' came the diplomatic reply.

Yet Mr Buchanan may have the last laugh as the EU's competition commissioner, Neelie Kroes, subsequently launched an anti-trust investigation into gas and electricity markets. As part of the inquiry, dawn raids were carried out on the offices of a number of European energy giants, including RWE and E.On Ruhrgas of Germany, Gaz de France and Belgium's Fluxys.

So which European companies told Mr Buchanan he was being stupid? Mr Buchanan declined to answer but said with a smile: "A lot of the companies are now working with the EU competition commission in their investigations.''

Difficulties abound in understanding the European energy market. The terms of contracts between gas producers and energy suppliers are unknown but are suspected to restrict the amount that can be sold to other countries such as Britain, even for higher prices. Data on how much gas is stored by energy companies is rarely available.

But while Europe is a big issue it can't be blamed for all of the UK's energy problems. Britain has only enough capacity to store 4pc of its annual needs compared with around 25pc in both France and Germany. With more storage Britain could have been better prepared for the tight supply over the winter.

However, Mr Buchanan believes Britain's lack of storage is understandable. Germany, for example, has long been highly dependent on imported gas through two pipelines. Such dependence encouraged large storage facilities to be built in case of disruption of supply, whereas Britain was, until recently, a net gas exporter with a range of domestic sources in the North Sea that lessened the need for storage. As domestic supplies declined quicker than expected, Britain became a net importer.

By the winter of 2007-08 Britain is set to have lots more storage facilities, incoming pipelines and ports that can process liquefied natural gas. Even if the whole network does not run at full capacity, it is expected to meet the country's needs without the sharp price spikes seen last winter.

However, only a little of the extra capacity is scheduled to be available this winter. Ofgem has already said that consumers could pay up to pounds 3bn more for its energy this winter in what could potentially be another year of tight supply.

"I hope that will be the last tight winter we have for a very long time because of this huge infrastructure that is being built at the moment,'' said Mr Buchanan.

The high wholesale prices still being experienced in Britain have been used by the energy companies to justify steep rises in bills. Consumer groups have complained as energy companies make large profits, which they say are needed to finance big investments in infrastructure. "We don't feel comfortable with rising prices given that our primary duty is entirely to the consumer,'' said Mr Buchanan, but he felt the companies were justified in making the rises given the huge spikes in wholesale prices.

He takes heart from the fact that the energy retail market is competitive as lots of customers switch suppliers when price increases are announced. After the rises of last September the number switching suppliers jumped dramatically within six weeks as people sought better deals.

But there's a quid pro quo for the energy suppliers. Mr Buchanan may be prepared to tolerate rising bills now but when wholesale prices start to fall retail bills should not be far behind.

"If we do see that then I think the regulator is put on his or her mettle to ensure that retail prices follow the wholesale price down,'' said Mr Buchanan.

"And if there is any hesitation that might suggest to us that there is group hesitation among the suppliers, then quite clearly we would have to look at them very, very carefully.'' So is Mr Buchanan, a former analyst and investment banker, made of the right mettle to see that through? "I believe as an analyst I didn't pull any punches,'' he said.

"From time to time we annoy the politicians hugely and I guess we are not doing our job if from time to time we don't annoy the customers. It just doesn't bother me.''

While in the financial sector Mr Buchanan worked for a number of investment banks including BZW and ABN Amro. He worked on many of the British utility privatisations in the 1990s including British Energy and National Power and spent two years in New York as head of utilities research at Salomon Smith Barney. On his return to Europe he also advised EDF in France on the early stages of privatisation.

Asked why he crossed over to become a regulator, Mr Buchanan gave a self-deprecating answer: "I guess my clients were probably getting bored of me.'' The real appeal of the Ofgem job was the mix of business and public policy as shown by the Government's recent energy review, which is expected to recommend Britain's current nuclear stations are replaced by new plants.

Ofgem, which has its headquarters on Millbank just a few minutes' walk from Parliament, is required to stay "technology neutral'' and declines to comment on the nuclear issue.

Being neutral also means Ofgem does not make firm predictions about how the market will develop. Its role is to try to ensure a level playing field that enables the market to determine the best option.

But as last winter's combination of high wholesale energy prices and limited supply of gas showed, even if Britain has an open energy market, things may not always run smoothly, something of which Mr Buchanan is all too aware. "We see getting Europe right as so important,'' he said.

Age 44

Family Married to Linda with two daughters and one son

Interests Fan of London Wasps rugby team and classical music

1980-83 Durham University BA in politics

1983-87 KPMG - chartered accountant

1987-2003 Worked as analyst and banker at various houses including BZW, Salomon Smith Barney and ABN Amro

2003- Ofgem chief executive