THE Office of Fair Trading is considering a request from a Liberal Democrat MP to investigate the gas market for signs of abuse.
John Hemming, MP for Birmingham Yardley, has asked the market regulator to look into what happened last year when wholesale gas prices soared. He also wants the competition watchdog to monitor the gas market for the coming winter.
Ofgem, the energy regulator, confirmed that it was considering Mr Hemming’s request with its colleagues at the OFT. Mr Hemming, who set up the Independent Energy Scrutiny Panel last year, said in his submission that he had the backing of several large industrial users of gas.
“In a situation in which LNG (liquefied natural gas) is expected to cost 37p a therm in January but the forward price for gas is 80p a therm, there is clearly something material going wrong with the UK gas market,” he said. “The Office of Fair Trading have a duty to investigate anti-competitive behaviour.”
Mr Hemming’s submission argues that the problems started when shippers used stored gas last winter, instead of importing it from the Continent. This created concern about the security of supply, sending wholesale prices soaring. “Failing to import gas is a form of anti-competitive behaviour, as it involves producing less gas for the UK, which is clearly a contravention of Chapter II of the 1998 Competition Act,” he said.
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“If shippers can be encouraged to import rather than use up stored gas, then we could hope to see some reductions in the prices in what is now the most expensive gas market in the world that I am aware of.”
Industry experts suggested that it may be difficult to persuade the OFT and Ofgem to investigate. Previous Ofgem investigations of the UK gas market have found nothing untoward.
Jeremy Nicholson, the chairman of the Energy Intensive Users Group, which includes steelmakers, chemical companies and brickmaking firms, said: “It will be something of an uphill struggle (to initiate an investigation). However, large users have never been fully convinced that the wholesale market is working as it should be.”
High forward wholesale prices for gas for this winter have moderated slightly in recent weeks, as concerns have receded over whether new import pipelines and storage facilities would be finished on time.