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British business braced for bumper energy bills
Published in The Saudi Gazette on 23 - 05 - 2008

British businesses are facing mammoth energy bills this year as record oil prices drive up gas and electricity costs across Europe, sparking anger among some consumers that competition is failing.
The price of oil has more than doubled since last year and wholesale power and gas prices have soared with it.
Big consumers – from steel makers to paper manufacturers – who buy their energy on annual contracts, are facing huge cost increases as they negotiate with their suppliers at a time when economic growth is slowing.
“We are very concerned... All the renewals of people on annual contracts are starting to see 50 percent or more in increases coming through,” Eddie Proffitt, gas group chairman at the Major Energy Users' Council said.
The MEUC, whose members include auto manufacturers, supermarkets and government offices, is concerned that there is very little difference in prices offered by suppliers in Britain.
“When any of our members go out to tender for the year... the actual variation in any of the quotes gets down to fractions of a percent,” Proffitt said.
“Certainly there is no competition whatsoever... They are using the oil market as an excuse for driving up gas prices.”
Many of the largest energy consumers have already seen their bills swell enormously because the price they pay tracks daily changes in the wholesale spot markets.
Gas prices for next winter raced to 93 pence per therm on Thursday morning, up more than 50 percent since the start of the year, as crude oil jumped to over $135 dollars a barrel.
Although oil is rarely used to generate power in Britain, the price of the coal and gas used are both tied to the price of crude and buyers must pay more to attract the fuel to Britain.
“That oil price effect directly impacts on the gas market here and our electricity production is much more sensitive to gas prices than many other European economies,” said Jeremy Nicholson, director of Britain's Energy Intensive Users Group.
The EIUG – which represents chemicals, ceramics, cement and glass companies – has also seen power price rises of more than 50 percent, with gas prices for next year more than double where they were last May.
Its members are equally concerned that Britain's energy markets are not working. “The prices in our supposedly competitive market are actually equal to in certain cases or above, and in one or two cases significantly above, the prices in non-liberalized markets run by a monopoly,” Nicholson said.
“In theory, people are competing with each other within the market but does it deliver internationally competitive prices? Not at the moment.” British consumers did see their energy bills shrink after the power and gas markets were opened up to competition in the 1990s and prices are still among the lowest in western Europe.
But as Britain becomes increasingly dependent on imported fuels linked to oil, soaring global energy prices are driving up prices quickly, hitting British business hard.
Competition between the six dominant suppliers does not seem to be delivering cheaper energy, they say.


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