MPs blame DTI ministers for gas shortages

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The Independent Online

A lack of leadership on the part of the Department of Trade and Industry is responsible for the shortage of gas supplies and spiralling gas prices, a cross-party committee of MPs has found.

A lack of leadership on the part of the Department of Trade and Industry is responsible for the shortage of gas supplies and spiralling gas prices, a cross-party committee of MPs has found.

The Trade and Industry Select Committee says in a report released today that the Government should consider easing the burden on industry of higher fuel prices by reducing the climate change levy.

The report warns that a lack of infrastructure to import gas into the UK and then store it has led to supply shortages and these in turn contributed to price spikes last autumn, which the committee expects to be repeated over the next two years.

Unveiling the report, the committee's chairman, Labour MP Martin O'Neill, said it had warned the DTI and the energy regulator Ofgem two-and-a-half years ago of the looming problem but ministers had given assurances that market mechanisms would ensure there was no supply crisis.

"There was a lack of leadership by the DTI," said Mr O'Neill. "They left it to the market and the market failed to respond. The rather optimistic view of the DTI has not been vindicated." He added that the committee could not take the "Panglossian view of the gas wholesale market that the DTI and Ofgem appear to hold".

He said that the "Doomsday scenario" of blackouts was unlikely, but it was possible that industrial and commercial gas customers on interruptible contracts might find their gas supply temporarily suspended to meet demand from domestic users and power stations.

A combination of higher energy prices, carbon emissions trading and the climate change levy had resulted in a "triple whammy" for industrial energy users. As a result, it was now time to examine the scope for cutting the levy to help UK industry overcome the "serious disadvantages" it is facing.

The committee said it had found no evidence of gas producers colluding with one another or withholding supplies to drive up prices. It also ruled out a windfall tax on North Sea oil companies but said companies such as BP and Shell, should consider "jumping before they are pushed" by providing financial support for those hit hardest by rising domestic fuel bills.

Consumer groups and big industrial energy users welcomed the committee's finding that price rises were due in large part to market failures whilst the EEF, the engineering body, backed the call for a review of the climate change levy.

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