Gas chiefs issue fresh supply alert

(Oli Scarff/Getty Images)

National Grid issued its second gas alert in three days today as the UK's freezing weather pushed demand to record levels.

The operator's gas balancing alert (GBA) came with gas demand expected to hit 454 million cubic metres today - higher than the all-time record of 449 million in January 2003.

A National Grid spokeswoman said technical problems had led to a 52 million cubic metres shortfall in supplies from the Langeled pipeline, which pumps in gas from Norway.

In response to the gas alert, National Grid said other suppliers were putting more gas into the network and major customers were cutting back usage.

Meanwhile the Guardian website reported that factories in the north-west of England and east Midlands were today having their energy supplies cut for the first time in years. It says the National Grid has withdrawn gas via suppliers such as British Gas from 94 industrial customers who signed up to interruptible contracts in a measure to safeguard power to domestic homes.

The alert was triggered by technical problems at Norwegian operator Statoil's huge Troll A platform. A Statoil spokesman said these had since been resolved.

The alert lasts until 6am and will be reviewed tomorrow. Wholesale gas prices rose following the GBA but eased back later.

Nick Campbell, an analyst with energy consultant Inenco, said the market had responded quickly to "extraordinary" events.

"As long as the cold weather is here, if we see any more supply glitches there is the potential for more alerts," he added.

The UK is more exposed to wholesale prices than other countries due to its much lower levels of gas storage - accounting for around 5 per cent of the country's needs, compared with around 24 per cent in France and 21 per cent in Germany.

Rough is the UK's biggest gas storage facility, accounting for around three-quarters of the country's storage capacity.

Energy Secretary Ed Miliband conceded today that the UK needed more gas storage, but accused the Conservatives of "playing politics" and scaring people with "meaningless" statistics about supplies.

The Tories said earlier this week that the UK only had eight days of gas storage left, but Mr Miliband said this ignored the role of imports and the North Sea.

City analysts expect the cold weather to boost the coffers of energy companies.

Cazenove analyst Edmund Reid forecast that British Gas parent Centrica was making around £1.5 million extra a day in January due to the increased demand.

He said: "In our view, the main beneficiary of the recent cold snap is Centrica, which should see a material increase in sales in its residential gas supply business."

He added: "We believe that, when Centrica announces full-year results for 2009, it is likely to beat expectations based on higher gas demand in December."

A Centrica spokesman said: "Prices per unit of gas remain exactly the same as they were last summer and we have protected consumers from these sharp spikes in wholesale demand by buying our gas many months in advance, as is our usual practice.

"The industry has invested £10 billion in the past five years in developing new sources of gas supply for the UK."

Shadow energy secretary Greg Clark said: "Two gas supply alerts in one week shows just how precarious the UK's energy position has become.

"This second alert should set alarm bells ringing about the future security of electricity supplies. Yesterday 44 per cent of electricity was generated using coal, yet a third of Britain's coal plants will be closed within five years with no adequate plans to replace them.

"In an era when we can no longer rely on the North Sea to meet our needs, the Government is shockingly complacent about the present and future threats to Britain's energy security."