Ofgas probes gas user complaints

The industry regulator Ofgas is to investigate complaints that UK gas suppliers have exploited capacity constraints to force up prices for large industrial users. The investigation follows complaints by big users’ groups and Transco, the national pipeline operator, that shippers have in recent weeks manipulated capacity constraints at the St Fergus terminal in Scotland for […]

The industry regulator Ofgas is to investigate complaints that UK gas suppliers have exploited capacity constraints to force up prices for large industrial users.

The investigation follows complaints by big users’ groups and Transco, the national pipeline operator, that shippers have in recent weeks manipulated capacity constraints at the St Fergus terminal in Scotland for commercial gain.

Under the Network Code, shippers can nominate in advance which of the five UK terminals they plan to use to meet their requirements. While the capacity of St Fergus has been temporarily cut by maintenance and expansion work, nominations through the terminal have risen sharply.

This has obliged Transco, under the Code’s flexibility mechanism, to buy the over-nominated gas at 14p a therm and bring it ashore somewhere else where the shipper can buy it back at half the price. Transco recovers the cost currently about £400,000 a day in its charges to shippers.

In a statement issued on Tuesday, the regulator said it had asked both shippers and Transco for information about recent use of St Fergus to enable it to carry out a detailed investigation.

‘Ofgas is concerned to ensure that no unfair commercial advantage is obtained because of capacity restrictions at St Fergus,’ the statement concluded.

Large consumers complain that shippers have passed increases on to them.

Eddie Proffitt, chairman of the gas group on the Major Energy Users’ Council, said the increase in purchases through the flexibility mechanism had forced up spot prices and the benchmark year-ahead price.

‘In mid-August, the year-ahead price jumped by over 1p a therm from about 12p to more than 13p,’ he said.