Regulator expands inquiry into rising wholesale gas prices

Click to follow
The Independent Online

The energy regulator Ofgem yesterday announced a widening of its inquiry into soaring wholesale gas prices but said that so far it had found no evidence of market abuse.

The energy regulator Ofgem yesterday announced a widening of its inquiry into soaring wholesale gas prices but said that so far it had found no evidence of market abuse.

Alistair Buchanan, the chief executive of Ofgem, said that in view of the ongoing concern about prices for this winter, the regulator was inviting views from the industry and customers on whether the sharp increase was due to anything other than general market conditions. Gas prices for this winter are 37p a therm - 12p higher than continental prices.

His comments came as Ofgem announced it had closed five of the seven lines of inquiry it began pursuing when it launched its investigation earlier this year into the spike in gas prices last winter.

The two areas it is still investigating are why gas deliveries from UK fields last winter were lower than expected and why gas shippers did not increase imports through the interconnector from continental Europe when UK gas prices rose so quickly.

Big industrial energy consumers welcomed the extension of the Ofgem inquiry but said it needed to be widened further to cover the entire structure and regulation of the offshore gas market. The Energy Intensive Users Group said it was taking a long time for Ofgem to get to the bottom of why gas deliveries last year were affected and why the tap on the interconnector was not turned up. "The lack of an adequate explanation for these reinforces concerns that something in the market remains seriously amiss," the group said.

It added that forward prices for this winter were well beyond the level that could be explained by supply, demand and storage levels or the influence of high oil prices. Jeremy Nicholson, the group's director, said: "High gas prices are a serious threat to our manufacturing competitiveness. It will take the combined forces of the DTI, Ofgem and the FSA to sort this out."

British Gas, part of the Centrica group, also called for increased transparency about the level of available gas supplies in the North Sea and a wider investigation into how the wholesale gas market operates.

Ofgem said transparency was easier to achieve in the electricity market because it licenced the whole production chain from generator to supplier. In the case of gas, Ofgem only covers the onshore gas market while the DTI licences offshore producers and shippers.

Comments