Britain told to "carry on cooking" despite gas supply warning

(Updates throughout with comments, prices)

By Susanna Twidale

LONDON, March 1 (Reuters) - British households were told to "carry on cooking" by the government on Thursday, as a warning of a gas supply deficit spooked the market and raised questions over the country's gas policy.

A nationwide cold snap with temperatures as low as minus 10.3 degrees Celsius and widespread snow has led to a sharp increase in gas demand which is used to heat as much as 80 percent of Britain's homes and also for cooking.

Prices for within-day gas delivery have more than quadrupled since the start of the week to 300 pence per therm on Thursday, the highest in at least 10 years.

Energy minister Claire Perry said there would be no disruption to domestic supplies and encouraged Britons to "carrying on using your gas heating and cooking meals as normal".

National Grid (LSE: NG.L - news) , which maintains the country's gas and electricity systems, also moved to calm the country and said its early morning alert over a potential gas deficit was a part of its "tool kit" to secure supplies from the market.

But the warning has re-ignited concerns that Britain has become too reliant on imports of gas and is vulnerable to supply shocks, especially after the closure last year of the country's largest gas storage site Rough.

At its operational peak the more than 30-year-old site could hold 10 percent of Britain's gas demand, but operator British Gas-owner Centrica (Frankfurt: A0DK6K - news) announced its closure last year, and said its maintenance had become too costly.

"Allowing Centrica to close (Rough) without consideration for supply during cold snaps ... put households and businesses at risk of shortages and price spikes," said Jonathan Marshall an analyst at the Energy and Climate Intelligence Unit.

A spokeswoman for the Department for Business, Energy and Industrial Strategy said Britain has many sources of gas supply and Rough's closure did not undermine the country's security of gas supplies.

"As part of our ongoing dialogue with the industry, representatives from across the storage industry will meet at the Department later this month to discuss the market's investment in gas storage," she said via email.

"Ultimately, decisions on investment in gas storage are made by the market," she said.

Wholesale electricity prices in Britain have also soared by more than 20 percent to almost 100 pounds per megawatt hour on Thursday.

The cold snap comes just days after a law was introduced in Britain's parliament aimed a capping consumers' energy bills, a move which Centrica said could hurt competition.

BEIS said it did not expect the wholesale price rise to lead to higher prices for households as energy firms typically hedge their exposure to commodity prices many months in advance.

"We would therefore not expect this short-term increase in wholesale prices to feed through to household bills," the spokeswoman said. (Reporting by Susanna Twidale, editing by Jason Neely/David Evans)