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| Ofgem Gas Probe
leaves Key Questions Unanswered |
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Press release issued Friday 28th May 2004 –
15:40pm
EIUG gave a qualified welcome to today's publication of
Ofgem's interim report into the surge in gas prices last year, whilst
expressing frustration that a full explanation is taking such a long time to
emerge. Ofgem is still waiting for information from the offshore industry to
explain why gas failed to arrive at key sub terminals, or why the
interconnector failed to flow gas to the UK as expected in an efficient market.
The lack of an adequate explanation for these reinforces concerns that
something in the market remains seriously amiss.
In the light of this, EIUG also welcome the fact that
Ofgem are now asking for views about gas prices for the coming winter, which
have reached even more alarming levels than those seen last year. Prices for
winter 2004-05 are now around 37p/therm, a 12p/therm premium above continental
prices, well beyond the level that can be explained by expected supply, demand
and storage levels in the UK, or the influence of higher oil prices in
neighbouring markets. EIUG supports Ofgem's extending their probe to include
the coming winter's prices, but believes a wider enquiry is needed covering the
structure and regulation of the offshore market.
Commenting on today's announcement, EIUG's Director
Jeremy Nicholson said: "Ofgem have been asking the right questions, but
customers can't afford to wait any longer for the answers. High gas prices are
a serious threat to our manufacturing competitiveness. It will need the
combined forces of DTI, Ofgem and the FSA to sort this out."
Notes to editors:
- The EIUG represents the UK’s industrial sectors
(above) for which secure internationally competitive prices are a matter of
commercial necessity.
- Industrial consumers are facing a 35%-40% increase in the
costs of their gas supplies next year, adding around £1bn to industrial
production costs ('The Business', 23/34 May 2004).
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