Energy bills may rise due costly wholesale gas

LONDON (Reuters) - A rise in British wholesale gas prices since the beginning of the year could translate into more expensive energy bills for homes and businesses if the trend continues, economists group Nera said on Wednesday.

Prices on the British gas market have soared over the last seven months, rising 32 percent due to lower Qatari liquefied natural gas (LNG) imports and shaky Norwegian North Sea pipeline supply, with the possibility of wholesale costs being passed on to customers.

"In the long run, it's true, gas prices do feed into retail prices. That's been observed over a long period. In the short term there is room for margins to vary," Graham Shuttleworth, director at Nera, told Reuters by telephone.

"What happens is the pressure builds up and there's a mismatch between wholesale and retail prices, then one of the companies move and the others follow. It's not entirely clear what triggers the move, so it's quite difficult to predict."

Britain's big six utilities cut residential gas prices in March this year following a report by UK energy regulator Ofgem which said last year's fall in wholesale prices should be passed on to customers.

"The very recent increases in wholesale gas prices since March will probably rule out any additional retail gas price cuts, but I don't know if it's enough to trigger an increase," Shuttleworth said.

Britain's big six utilities are Scottish and Southern Energy, Centrica, RWE npower, EDF Energy, E.ON UK, and Iberdrola's Scottish Power, and regulations mean utilities are not able to comment on future price movements.

But those campaigning for lower bills said that utilities' price cuts in March did not go far enough and bill hikes linked to recent high wholesale prices are not justified considering low wholesale prices last year.

"We feel that the level off price cuts offered by the companies earlier this year did not go as far as could have been expected given the sustained low wholesale costs," a spokeswoman for UK consumer group, Consumer Focus, said.

"We therefore think that the increase recently is not enough to justify price hikes, particularly as wholesale costs have had another small dip recently."

Wholesale prices have eased in the last week following the expected arrival of more Qatari tankers carrying super-cooled liquid gas, but are still up nearly a third since the beginning of the year.

(Reporting by Kwok W. Wan; editing by James Jukwey)