NHS warns gas price hike will hurt patients

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The Independent Online

The National Health Service is urging the Government to launch a formal investigation into the recent jump in gas prices, which it claims could adversely affect the care of patients.

The wholesale price of electricity has doubled in the past three months and NHS insiders have revealed that its bill this year is £15m higher than in 2002.

"The NHS trusts will have to dig deep, and ultimately this will impact on patient care," said one senior NHS source.

In a letter to Alistair Buchanan, chief executive of the energy regulator, Ofgem, the NHS argues that a formal investigation is required to establish whether the market is being manipulated.

Ofgem is already looking into the unusually steep rise in gas prices after it received allegations of market abuse earlier this year. The regulator has conceded that "it is not clear that market fundamentals can explain the recent gas price movements".

Already, British Gas has announced that domestic gas bills will rise by 6 per cent in January. But the increase in wholesale prices will come as a particularly severe blow to the NHS trusts, which are under intense pressure to stick to their budgets.

Mike Gaunt, energy manager at Leeds Teaching Hospitals NHS Trust, said: "This is an added financial pressure. We are not allowed to overspend, which means we will have to find the money by other means. We can't turn off the gas, so extra costs will impact somewhere else in the organisation."

One of the biggest bugbears of large gas customers is the apparent lack of information about the operation of the wholesale market. In its letter to Ofgem, the NHS says that this could lead to false bidding, the use of inside information and market monopolisation.

The NHS is not alone in having suspicions about the gas market. The energy company Scottish & Southern has also written to Ofgem, urging it to investigate using the powers of either the Competition or Enterprise Act. "We believe that such an investigation is vital to restore confidence in the competitive supply market," it said. "We firmly believe that the lack of upstream information ... provides an opportunity for some participants to manipulate the market."

The Energy Information Centre, which represents 40 per cent of FTSE 100 companies, has told Ofgem that the gas traders' behaviour "seems to have been at all times to maximise the UK gas price".

Most of the big gas producers have confidentially sent explanations of why wholesale prices are now higher than at any time since the market was deregulated in the 1990s. The companies are understood to have blamed the increases on a number of factors, including the sudden drop in temperatures in the second half of October; the recent rise in the oil price, which influences the gas price; and a series of off-shore gas production problems during October.

A spokesman for Ofgem said: "We are seeking views to see if any action needs to be taken. Once we have considered this, then we will decide whether to launch a formal investigation."

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