15 March 2006 | Rebecca Ellinor

UK gas storage could be empty before the end of March, according to utility consultants Power Efficiency.

The firm made the grim warning following the "gas balancing alert" issued by National Grid for the first time this week and the quadrupling of prices on Monday to 255p/therm. The same gas on Friday cost 60p/therm.

National Grid, which manages the UK gas pipeline network, confirmed that it issued the alert on Sunday for Monday and it was in place all day. It said it acted as a "signal to the market that if demand continued at current levels, the UK could run out of gas.

The alert is triggered when forecast demand for gas rises above 377 million cubic metres on a particular day. National Grid said the warning alerts the market to take action such as buying or releasing gas from alternative sources of storage or through the continental interconnector. The alert can also act with a "demand-side response" which involves selling gas back into the market and running on alternative fuels.

A National Grid spokesman told supplymanagement.com: "It wasn't a request to curb gas usage or switch off, just a signal to the gas market that there is an opportunity to source additional gas or offer a demand side response."

The mechanism was introduced in November last year, when UK gas then set a then record price of 165p/therm.

Power Efficiency issued its monthly newsletter for its larger clients on Monday and said: "At the current rate gas storage will be empty before 26 March."

The consultancy firm advised clients to switch to oil while gas prices remain high and said gas buyers should consider hedging as part of a risk management strategy rather than simply paying day-ahead prices and hoping for the best.

Mark Callaway from Power Efficiency told supplymanagement.com: "Big industrial companies can buy day ahead prices or build a portfolio of fixed price blocks by, for example, buying at today's price for half of the winter. But most are tending to use day ahead which we know has worked out more expensive and is riskier."

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