British Gas has made an announcement to reassure its domestic customers as gas prices increase across Europe due to the cold weather and an increase in demand.
Utility Exchange reported last week that the cold spell could force up business gas prices. Now gas prices have increased across Europe as demand for gas has increased as a result of the cold weather but British Gas has reassured domestic customers prices will not go up this winter.
Gas prices in the UK have risen to 93p per therm for next day delivery which is the highest we’ve seen for six years. In other words the price of gas has increased by 24% in the UK since Utility Exchange warned of price rises last Friday.
Most energy suppliers which supply residential customers rarely buy gas on the next day market but many big commercial users rely on gas from the next day market.
Speaking from the UK Energy Intensive Users Group, Jeremy Nicholson said “This is a pretty savage price hike for large-scale users of gas. A very large proportion of major industrial gas users pay for their supply on a next-day basis, so these price hikes will filter through much more quickly to them. I understand the current US price is around 15p per therm for gas, and it is a market which has an oversupply of shale gas, unlike the UK, so perhaps there are lessons to be learned here”.
Italy has already started to ration gas to industrial users because they’ve not received enough gas from Russia to meet the current demand. Meanwhile France is seeing higher gas prices than in the UK. It is also having problems meeting demand and as a result prices there have reached £1.02 a therm.
Utility Exchange reported last week that Russia had cut gas supplies to some European countries and there are still concerns over supplies from Gazprom. However, the European Commission has reported that gas flows from Russia have returned to normal levels.
British Gas has reassured domestic customers that despite the increase in wholesale gas prices, their winter gas prices will not be affected. Much of the gas British Gas bought for the winter was purchased before the rise in wholesale gas prices. Consequently, British Gas has said it will hold prices for its customers.
The managing director of British Gas, Ian Peters, said “We know household budgets are already under pressure, and people will be worried by the cold snap and reports of record high gas prices in the wholesale market. British Gas customers shouldn’t be alarmed by reports of rising demand and record rises in the short-term wholesale markets. Because we’ve already bought the bulk of the gas our customers will need this winter, we can ensure we have enough for our customers – and we can protect them from spikes and sudden rises in the wholesale markets like the ones we’ve seen this week”.