Ofgem Calls For Action On Gas Supply Practices In Europe

by Ulrika Lomas, for LawAndTax-News.com, Brussels

29 November 2005

The UK's energy industry regulator, Ofgem earlier this month welcomed the European Commission's announcement that it would be reviewing gas supply practices in continental Europe to discover whether the market is being distorted.

Substantial gas price increases in the United Kingdom have meant that supplying gas to the UK market should be very lucrative.

However, penalties in place in countries such as Spain for gas suppliers who fail to meet their supply commitments there have meant that Spanish-based international gas suppliers have been keeping their reserves for the domestic market.

Speaking to the BBC this week with regard to the news that the gas pipeline between the UK and mainland Europe has not been running at full capacity despite potential shortages in the UK, an Ofgem spokesman announced that:

"We are looking for answers to the recent inflation in prices. We need to determine that the price movements have been caused by supply and demand factors, rather than any distortion of the market."

"Consumers need to be satisfied there are no signs the UK market is being manipulated from Europe."

Earlier this month, responding to an announcement by the European Commission on the main issues facing its review of the European energy market, which was announced in June this year, Ofgem’s Chairman Sir John Mogg stated that:

“Ofgem, along with the European Energy Regulators, fully supports this review. Our consumers and businesses are paying a high price for the lack of competition in most continental energy markets. This is why anti-competitive practices must be stamped out and effective rules of the game introduced and properly policed."

“The Commission has so far shown real determination to collect and analyse the data to make a powerful case, but now they need to come forward urgently with their remedies. The Commission is likely to face heavy resistance from major continental players. I urge them to stand firm."

The interim report they promise for early 2006 is vital in paving the way for liberalised and competitive EU energy markets.”

The Commission’s preliminary report is likely to be published in the first three months of 2006.

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