APPENDIX 18
Memorandum by Harrow Council, London
You will no doubt be aware that the UK is currently
suffering some of the highest gas prices in Europe, with increases
of up to 80-90% seen in the past two years.
This is affecting public and private sector
commercial and industrial consumers alike, and is particularly
acute for large-scale gas consumers. Not since the Climate Change
Levy has industry faced such an important issue on energy.
Here within the London Borough of Harrow the
impact of the increases has been considerable. The Authority has
a total annual gas utility spend of approx. £1 million and
currently procures its gas under two contracts. The larger of
these contracts is for the supply of gas to several of the Authority's
schools and social care premises. Upon renewal of this contract
prices were noted to rise by approx. 80% compared to two years
ago when the contract was first let.
The unprecedented price rise has placed the
Authority's budgets under severe pressure which may in turn affect
the ability to deliver services. Budgets for these areas have
had to accommodate the increase in utility expenditure and the
inevitable consequence of this will be dissatisfaction from service
users.
The impact of the price rises on local businesses
within Harrow will also be significant. Local firms will inevitably
pass the increased energy costs on to consumers through higher
pricing of their goods and services.
We see no legitimate reason why gas prices in
the UK should be so high and in support of this view we would
cite the following:
(i) The trend in gas prices does not appear
to align with economic fundamentals.
(ii) The UK gas price index has risen by
66% since January 2004 yet the Oil index has risen by 30% over
the same period.
(iii) Industrial consumers abroad are currently
paying on average 35% less for their gas and yet we understand
that the discrepancy between UK and European prices bears no correlation
to interconnector flows.
The rise in costs is beginning to threaten the
UK's large industrial and commercial users. We are extremely concerned
that if no action is taken and this situation is allowed to continue
the economic consequences both nationwide and locally will be
significant.
We are aware that the Trade and Industry Select
Committee is due to meet and report imminently and would like
our concerns to be given urgent consideration.
23 November 2005
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