|
|
 |
| EIUG Calls for
OFT to Investigate Gas Market |
|
 |
EIUG members have been hit hard
by high gas prices over the last two years. The reasons for the high prices
have still not been fully explained. EIUG fears that the root cause -
inadequate competition in the UK wholesale market - remains unaddressed. It has
therefore asked the OFT (Office of Fair Trading) to investigate.
The price rises, which began in 2000, followed the
opening of the Interconnector with Belgium, allowing the perception of a
linkage between gas and oil prices to be re-established. This linkage had been
broken with the opening up of the UK gas market, but remains a feature of
mainland European markets that have yet to be liberalised. Wholesale prices,
which had been stable at around 11p/therm, doubled in under a year. At the
DTI's request, the European Commission held an enquiry into the operation of
the interconnector. As a result, a number of improvements were required in the
interconnector's operating rules and its commercial regime. Wholesale prices
for the October 2002 gas year currently stand at 20p/therm, around 80% above
the level of two years ago. In EIUG's view, wholesale prices no longer
adequately represent the cost of production or the balance of supply and
demand.
In response to widespread concern, DTI launched a
consultation on gas prices and improvements to market efficiency in November
last year. The consultation ended two months ago and the DTI is currently
considering what action is required. A
copy of EIUG's response is now available. In its response to the DTI, EIUG
said:
- The OFT should investigate the state of competition in
the wholesale market, which is dominated by five large, vertically-integrated
players, whose interests are commercially aligned, and whose trading
effectively sets the market price.
EIUG also wants to see:
- Increased investment in onshore transmission
capacity.
- Improvements in customer access to gas market
information.
- Recognition that European gas market liberalisation will
take years to achieve.
- Changes to DTI's dual role as regulator and sponsor of
the offshore gas industry by extending the role for Ofgem (the independent
market regulator).
. Notes to editors:
- EIUG represents energy-intensive industries whose
business depends on competitive energy supplies, which purchase around half of
the UK's industrial gas.
- Wholesale prices rose from around 11p/therm in January
2000, reaching a peak of nearly 30p/therm by the end of 2000, adding around
£500m to energy-intensive users' annual gas bills. Prices currently stand
at around 20p/therm for the October 2002 gas year.
- The DTI announced a consultation on gas prices and
possible improvements to market efficiency in November 2001 and ended its
consultation period on 28 February - it has yet to announce what further action
it intends to take.
- For further information, please contact Jeremy Nicholson,
EIUG's Economic Adviser: (tel. 07785 280 568).
|
|
