Gas price surge threatens bigger bills

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European gas prices are linked to oil, which hit a record of $119.93 last week, but the effect has been stronger on Britain's liberalised market, where traders are adding a risk premium over concern that enough fuel will come to the country next winter.

Some analysts say forward British gas prices are unsustainably high and should tumble by the time winter arrives.

But, with the Organization of the Petroleum Exporting Countries among those warning oil could keep rising, others see little chance of a big fall in energy costs.

"The key driver here is economic growth in the Far East and while that remains strong it is difficult to see any short-term relief from high oil prices," Andrew Wright, director of markets at energy regulator Ofgem told an industry seminar last week.

"I would take the very strong gas prices for next winter very seriously."

Wholesale British gas prices for next winter hit a contract high of 85 pence per therm on April 22, almost 50 percent higher than in January, and have remained above 80 pence since.

Winter prices are not quite at the levels seen after Britain's biggest gas storage site, Rough, caught fire in early 2006, stoking fears of possible winter supply shortages.

But the surge in prices that followed the fire was a serious threat to supplies and came before Britain's import capacity was boosted by new pipelines from Norway and the Netherlands.

"You can understand two years ago why the prices were very high because we were very short of gas. But the supply situation is very comfortable for the coming winter," Niall Trimble, managing director of the Energy Contract Company said.

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