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Gas And Electricity Industries: Purchasing And Pricing Policies

Volume 489: debated on Wednesday 28 October 1987

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asked Her Majesty's Government:Whether the (i) weighted average gas price charged by British Gas places United Kingdom industrial consumers at a 50 per cent. cost disadvantage against those in Western Europe; and (ii) whether the CEGB buys most of its coal at prices more than £10 per tonne above those ruling in Rotterdam, and, if so whether this is in the interest of obtaining energy supplies for industry at prices competitive with those obtaining in France, West Germany, the Netherlands and Italy.

The detailed purchasing and pricing policies of the industries are a commercial matter for them, within the constraints of the Government's financial or regulatory framework as appropriate.

British Gas sells into the industrial market in competition with other fuels. British Gas publishes its maximum contract price, but industrial consumers who negotiate effectively may achieve substantially lower prices. The figures for UK gas prices published by the Department of Energy in the September issue of Energy Trends do not appear to support my noble friend's suggestion of an average 50 per cent. cost disadvantage against Western Europe.

The CEGB's coal purchasing takes into account such factors as international coal prices, the cost of transporting coal, the prevailing sterling exchange rate and long-term stability of supply. Spot prices, such as those quoted in Rotterdam, do not usually reflect the price of long-term supplies nor apply to the large volumes required by the CEGB.