CIPS chair demands gas price probe

5 February 2004
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05 February 2004 | Simon Binns

Utilities buyers are bracing themselves for further price rises amid claims of market manipulation by gas suppliers and unrealistic government environmental targets.

Ian Dobson, chairman of the CIPS energy committee, has written to energy watchdog Ofgem accusing gas traders of manipulating the market to keep prices artificially high.

"It is believed that many of the major chunks of gas that change hands between the suppliers and shippers occur in some 'under the table' way that does not appear on the trading exchange," the letter states.

Dobson is demanding a full investigation. "We saw a sudden 50 per cent lift on the previous day for no reason," he said. "But it's hard to prove price-fixing."

Richard Hunt, spokesman for Ofgem, admitted several parties had questioned the sudden price rise and an informal investigation with the Department of Trade and Industry was under way.

"The prices during the period in question did not reflect the norm, so we are looking into it and contacting the relevant bodies," he said. He would not confirm whether a full investigation would follow.

Water and electricity prices are also set to rise this year owing to industrial maintenance work and plans to reduce harmful carbon dioxide emissions.

Ofwat has outlined its five-year plan to increase water bills to pay for crucial maintenance work by as much as 30 per cent in the north east, north west and parts of south-east England, along with Wales. It also plans to raise water and sewerage bills by 50 per cent in the north west.

Dobson expects the costs to affect heavy industry.

"There will certainly be a sharp rise and it will be a big hit to industrial purchasers," he said.

"A lot of those in heavy industry may have their own supply, but most companies are not aware this work is around the corner.

"This work is essential and must go ahead, but it will certainly cause a few large headaches."

Dobson also believes that the UK government's plans to cut CO2 emissions by 20 per cent by 2010, as opposed to the 12.5 per cent laid down in the Kyoto agreement, could lead to a rise in wholesale electricity prices to cover the generators' costs.

"Even if the government had gone for the bare minimum, as agreed at Kyoto, that would have been bold enough," he said.

But the government had overcommitted and needed to rethink its entire strategy, Dobson added.

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