Calor set to turn up price of gas next winter

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The Independent Online
Three million households and businesses who regularly buy bottled gas from the market leader, Calor, were likely to face winter price increases, the company said yesterday.

The price hike could come in response to the recent rise in oil prices, which are at some of their highest levels since the start of the Gulf War in 1990. Liquid petroleum gas, which Calor sells in its familiar metal "bottles", is mostly extracted from crude oil during the refining process.

Calor, which has 50 per cent of the UK market, had cut its bottled gas prices for retail customers from 20p a litre to around 18p in response to cut-throat competition from oil companies such as Esso. But John Harris, Calor's chief executive, said yesterday: "The black cloud on the horizon is that as we go into the winter the cost of gas will rise. I cannot shield the customer totally."

Mr Harris declined to put an estimate on the size of the price rise, which depends on the level of oil prices over the next few months. About half of the 3 million customers are businesses, with the rest made up of households which generally do not have access to piped natural gas.

The impact of any price increase would be reduced because Calor has stored about one-third of its winter supply in vast tanks at Felixstowe and Immingham, near Hull. But Mr Harris said this lower-cost stored gas was "nowhere near what we need for the winter".

Oil prices rose earlier this year from $18 (pounds 11.50) a barrel to $23 after the cold winter drastically cut US stocks, and prices have hovered at around $20 ever since. Analysts have suggested prices are unlikely to fall significantly, given that Iraqi oil supplies are not expected to come on stream following the recent US air strikes. Yesterday Brent crude was trading at $22.40 a barrel.

The news came as Calor announced a small drop in pre-tax profits in the first half of the year from pounds 26.2m to pounds 25m. Earnings were hit by a pounds 14m root-and-branch restructuring programme which involves shutting the head office in Slough and building a new customer service centre in Leamington Spa with the loss of 200 jobs.

Calor claimed its joint venture to supply the domestic natural gas market in competition with British Gas was "exceeding expectations".

The company, called Calortex, is involved in the competition trial under way with 500,000 households in the South-west.

So far more than 60,000 customers have switched from British Gas, with many moving to the gas business set up by Sweb, the local electricity company. Mr Harris said Calortex was now on course to match or overtake Sweb, though he said precise figures were confidential.

Investment column, page 16