Energy price rises 'inevitable'

Gas customers should brace themselves for more price rises

Further increases in energy prices are "inevitable", an influential committee of MPs has warned.

Urgent action is needed to boost the UK's gas stocks, it said.

The Trade and Industry Committee report added that while surplus stocks remain small, some customers' gas supply may even be temporarily suspended.

The government should consider cutting taxes to enable companies to improve supplies without raising customer tariffs, MPs said.

"It is now time for the government to re-examine the operation of the Climate Change Levy, and in particular to consider scope for reducing it to help UK industry," the report said, noting that previous price increases had already had a "significant" effect on UK consumers.

Pricing problems

Committee chairman Martin O'Neill said consumers faced "serious disadvantages" while companies try to resolve gas supply problems.

"These problems are serious enough for us to conclude that the autumn 2004 price spike and the recent spike in late February will be repeated over the next two years," he said.

Tariffs have increased in recent years as wholesale prices have risen.

Many firms now import gas from the continent and this situation means that the UK is "virtually at the whim" of unregulated monopolists in Europe, Mr O'Neill told BBC Radio 4's Today programme.

"In one or two instances major British importers of gas found it rather difficult to get more than about two prices for long contracts which they wanted to strike last September," he added.

"That suggests that there may have been some of the players who were frankly holding back supplies in order to see if the market would rise."

The problem is exacerbated by the small size of the interconnector pipe through which the UK gets its European gas supplies. The pipe was designed on the assumption that the UK would never import more than it exported, Mr O'Neill said.