LONDON (Reuters) - A cold snap dubbed the ‘Beast from the East’ sent British wholesale energy prices to at least 10-year highs on Wednesday as traders scrambled to secure supplies.
Britain’s Met Office weather service forecast sub-zero temperatures for much of the week, with gas supplies facing a crunch on Wednesday due to outages.
Temperatures fell to minus 12 Celsius (10 degrees Fahrenheit) in some rural areas while the Met Office warned of up to 40 cm of snow in parts of Scotland and Ireland braced for what could be its biggest snowfall since 1982.
The cold snap comes just days after a law was introduced in Britain’s parliament aimed a capping consumers’ energy bills, a move which British Gas owner Centrica said could hurt competition.
“The (British) market is acutely tight. Highest consumption since 2010; flexibility being tested from various sources and now UKCS (UK Continental shelf) and Norwegian outages,” said Thomson Reuters analyst Oliver Sanderson.
Prices for within-day gas delivery surged 146 percent to 190.00 pence per therm, their highest for at least 10 years. Wholesale power prices rose 30 percent .
As much as 80 percent of Britain uses natural gas for home heating, meaning cold temperatures can have a big impact on demand which on Wednesday was almost 30 percent higher than normal, National Grid data showed.
An outage at the Kollsnes gas processing plant sparked concerns about imports from Norway, which over the past two years has provided about 40 percent of Britain’s gas, some of which is re-exported to Ireland, Thomson Reuters data showed.
Smaller outages at British sites supplying gas from the North Sea added to supply concerns.
Britain’s ability to respond to short-term demand shocks has been hampered by the closure last year of Centrica’s Rough gas storage site, the country’s largest.
At its operational peak, Rough could store around 10 percent of Britain’s gas demand.
Very high demand combined with some supply outages “is underlying the impact of the loss of flexibility driven by the closure of Rough and the big reductions in supply seen from Groningen,” said Energy Aspects analyst Trevor Sikorski.
Output at Groningen, Europe’s biggest gas field, has plummeted as Dutch authorities try to reduce earthquakes in the region.
Dutch gas exports to Britain fell more than 50 percent last year, data from Britain’s Department for Business, Energy and Industrial Strategy showed.
Britain’s top power utilities typically hedge supplies many months in advance so short-term price spikes should not automatically trigger higher prices for customers.
But smaller suppliers, which account for around 20 percent of the market, are usually less hedged and may need to pass on price rises sooner.
Bulb, which has around 300,000 customers, said on Tuesday it would raise bills by 2.8 percent from April 28.
Reporting by Susanna Twidale; editing by Jason Neely