Rising fear of UK energy crisis this winter

LONDON, ENGLAND - Britain faces the prospect of power shortages and soaring prices this winter after the National Grid warned of a shortfall in electricity-generating capacity. The alert coincides with a surge in gas prices, which are now 40% higher than in continental Europe, and the confirmation that a vital import plant in South Wales will not be operational this winter.

And it emerged that the energy minister, Malcolm Wicks, met power providers and users to discuss mounting concerns that the UK was heading into another winter of soaring prices and power shortages, similar to the one that forced some manufacturers to shut down capacity 24 months ago.

The warning by the Grid, which operates the pylons and other parts of the electricity transmission system, came days after it reassured ministers that an earlier alert was nothing to worry about and that there were no expectations of power blackouts this winter.

The fragility of the country's power infrastructure is partly the result of a series of breakdowns at the UK's ageing nuclear reactors. It is an embarrassment to the government, which has often insisted that two years of price peaks and insecurity would end in 2007 as Britain benefited from extra investment in pipelines and import facilities.

But just recently the Grid carried a "transmission system warning" on its website calling for an extra 300 megawatts of capacity to ensure sufficient slack in the electricity supply system between the peak periods of 1600 GMT and 1930 GMT, when homeowners put the kettle on, turn on the television and make supper.

The company issued a similar warning on October 19 but insisted that these were precautionary and did not mean there was any immediate risk of a power cut. "This is just a tool to ensure we can deal with the unexpected. It is a normal part of the market working and not a reason for concern," said a spokesman.

Jeremy Nicholson, director of the Major Energy Users Council who attended the talks, said everyone had been caught by surprise by a recent 30% surge in the forward price of electricity and gas. "We are all trying to understand why the supply situation looked fairly good and yet prices have suddenly shot up."

The surge in wholesale prices is likely to encourage suppliers to pass on the burden to domestic users. Mark Todd, a spokesman for energyhelpline.com, which helps customers switch suppliers, says his contacts have told him to expect a 10% rise in gas and electricity bills after Christmas.

Gas is used directly by many of the steel, chemicals and paper manufacturers represented by Mr Nicholson but is also used to generate power to provide electricity. Gas prices are heavily influenced by the value of oil, which this week hit record levels of $93 a barrel, and also by availability.

A liquefied natural gas (LNG) plant being built by BG, formerly part of British Gas, at Milford Haven in South Wales, was expected to be finished this year but the company said industrial action by contractor staff and other difficulties had pushed back its completion to 2008 with "no definite date yet for opening".

Sources close to the company said there was no chance of the facility being able to bring in shiploads of LNG from Qatar to meet peak demand this winter.

There has also been uncertainty over the amount of gas coming into the market this winter from Norway's Ormen Lange field in the North Sea. The Langeled pipeline linking the field with an import plant at Easington, east Yorkshire, was opened last year and is taking some gas but it is unclear when it will be at full capacity.

Centrica, the owner of British Gas, which has contracted with Norway's StatoilHydro to bring in the supplies, insisted last night that concerns were misfounded. "There is plenty of capacity there," said a spokesman. "When this (Langeled) is fully up and running it will be able to supply 20% of all Britain's gas needs."