Gas Bills 'Could Rise' Due To Low Reserves

Thomas Moore, Health and Science Correspondent

Gas prices could soar this winter if the national supply runs short during another cold snap, an energy expert has warned.

Industry analyst Peter Hughes told Sky News that a "perfect storm" last March of extreme weather and the shutdown of two major pipelines caused prices to double.

And that could happen again because the Government has refused to support the storage of more gas.

"It foreshadows things to come," he said.

"The situation in terms of the risks will only get worse as North Sea production runs down and demand rises.

"That's the double whammy. And if you don't have more storage that translates into real vulnerability."

Britain currently stores enough gas for 13 days of supply. But Germany has reserves to last 69 days, in case there is a problem with the supply from countries such as Russia.

Storage companies buy up cheap gas in the summer, then release it over winter. The effect is to stop prices soaring.

A report by the Redpoint energy consultancy, commissioned by the Government, showed subsidies to encourage investment in more storage could save consumers almost £1bn over 10 years.

It examined four scenarios, three of which showed a net reduction in gas bills.

But Energy Minister Michael Fallon rejected subsidies based on the one scenario to show an increase in costs. He also ignored long-term savings, making the costs look worse.

Speaking to Sky News, he was unrepentant, saying. "The money would ... be put on consumers' bills now.

"I would have had to be persuaded that this was a subsidy worth paying. I don't think it is worth it."

Three projects to increase storage capacity have been shelved in the wake of the decision.

Stag Energy had planned to pump gas into caverns under the Irish Sea, but said the scheme was now too expensive. Company boss George Grant said the Government had been shortsighted.

He said: "We view gas storage as an insurance policy for consumers.

"The Redpoint analysis shows there is a net benefit to consumers, but that's a point the Government glossed over."

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