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Winter Energy Supply

Volume 450: debated on Thursday 12 October 2006

The National Grid Winter 2006-07 Consultation Report published by Ofgem on 21 September continues to indicate the possibility of a tight supply-demand balance for gas this winter. But it also makes it clear that energy supply should meet daily demand under all likely weather-related scenarios. The winter electricity generating margin is expected to be around 22 per cent. The Met Office winter forecast published in September indicates near-average winter temperatures overall, with possibly some colder weather later in the winter.

The wholesale price of gas for this winter has fallen since I made my last statement to the House on winter energy supply. Energy prices however remain of concern to domestic and industrial users. The Government are therefore continuing to work actively to ensure that everything possible is done to maximise supplies of gas to the UK for the coming winter and to mitigate the impacts of price rises.

Gas supplies from the UK continental shelf will continue to meet a significant proportion of UK gas demand: about three-quarters of demand on an average winter day. The balance is made up from imports and stored gas.

Since my last statement to the House, there is now greater certainty that new import infrastructure will be available this winter. The Langeled pipeline, connecting the UK to the Norwegian continental shelf, is now flowing gas from Norway, on schedule. The upgrade of the Belgian Interconnector (linking Bacton and Zeebrugge) has been completed ahead of schedule. The BBL (Balgzand-Bacton) pipeline, which will flow gas from the Netherlands, is on course to begin operation on 1 December. The Teesside offshore Liquefied Natural Gas (LNG) importation project is on schedule to be available in the New Year. The Rough long-range storage facility is back in operation following last winter's fire. Levels of gas in storage ahead of the winter are healthy.

My Department has been working closely with the energy market regulator Ofgem, National Grid and business to ensure early action is taken to maximise gas and electricity supplies for the coming winter and to ensure good communications with industry. I have jointly chaired with Richard Lambert of the CBI two meetings of the new Business Energy Forum ahead of the winter, to ensure that accurate and timely information is available to businesses.

The Government are also working with energy suppliers and others to reach vulnerable domestic customers, particularly pensioners on low incomes. A range of programmes including Warm Front and the Decent Homes Standard contribute to tackling fuel poverty and to improving the energy efficiency and comfort of the homes of vulnerable customers. Expenditure on winter fuel payments amounts to some £2 billion per year.

Beyond this winter, from 2007-08 the gas supply-demand balance should ease further, with access to gas supplies from the new Norwegian Ormen Lange field, new LNG importation facilities at Milford Haven, and more storage. This is part of the £10 billion of actual and planned investment in gas supply infrastructure and related transportation expected between 2005 and 2010.

In July the Government published the conclusions of their energy review. This set out the framework for ensuring secure and affordable energy supplies in future years.

The Government will be taking forward the further work arising from the energy review over coming months.

I will update the House on further developments as the winter progresses.