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Gas Price Likely to Go Still Higher

Posted on: Monday, 2 January 2006, 06:00 CST

By Joe Churcher

Ukraine dispute blamed for latest fears

Energy firms could exploit fears over the impact of a gas supply dispute between Russia and the Ukraine to hike prices further, a consumer watchdog warned yesterday.

Energywatch chief executive Allan Asher hit out at rises already being made ( two of which took effect yesterday ( saying there was "no excuse" for them as supplies were generally good.

And he suggested prices could escalate still more following Moscow's decision to cut the flow of gas to its neighbour in a move that has caused political outrage.

Russia has denied that its move will affect its exports to western Europe, much of which are channelled through the Ukraine.

But Mr Asher said that would not stop energy companies using the crisis to push up prices, with an inevitable impact on domestic bills.

He told the BBC: "We don't draw very much gas at all, well none, from that part of the world and there are lots of other sources of gas for us.

"However, it might create some shortages in western Europe which might put a bit of pressure on prices there and, sadly, the gas and oil companies are always looking for excuses to ramp up the prices. So it would be the fear, uncertainty and doubt that causes the problem, not physical supply.

"Coal prices are falling, oil prices are falling ( those were the things they told us were the causes of price rises last year."

Millions of households and businesses are already set for a more costly start to 2006 after two major suppliers raised prices from yesterday.

Scottish and Southern Energy (SSE) will increase gas bills by 13.6% ( or around pounds 50 on the average bill ( and electricity charges by 12%, or about pounds 30.

Rival company npower also chose yesterday to put up its prices by 14.5% for gas and 13.6% for electricity ( adding pounds 58 and pounds 38 respectively to a typical bill.

The pair, which announced plans for the price rises in November, serve around 11 million homes.

It is the latest round of increases following a surge in wholesale gas prices, brought about in part by the fact that the UK is no longer self-sufficient in gas after North Sea supplies dwindled.

But speaking on BBC Radio 4's Broadcasting House programme, Mr Asher said: "Just for this very short period of winter, there is a shortage of supply but generally there is plenty of gas around and really no excuse for this ramping-up of wholesale prices."

Prices looked set to go up another 15% this year, a similar rise to 2004 and 2005, he said.

The Russian move to cut off supplies came after the Ukraine rejected a fourfold price increase demand.

Source: The Journal - Newcastle-upon-Tyne

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