The Confederation of Paper Industries (CPI) is backing calls by the Energy Intensive Users Group and the Energy Industry Regulator for an investigation into wholesale gas prices.


"The rise in wholesale gas prices is threatening the profitability of the UK paper industry," said CPI director general Peter Scott.


"These added costs are intolerable, and come at a time when the industry is battling against the added pressures caused by the strength of sterling, the euro and the Climate Change Levy," he added.


Gas accounts for over 60% of papermakers' fuel bills. In the past year it has increased in price by around 100%, adding 50m per year to the UK industry's costs.


"The increases have happened against a background of a liberalised UK market where pricing should be competitive," said Scott.


"This raise serious questions about the behaviour of continental gas monopolies that can only be answered by a full investigation."


The impact of gas prices will also affect investment in Combined Heat and Power (CHP) plants, resulting in companies thinking twice before embarking on a CHP venture.


Paper industry companies have installed around 20 gas-fired CHP plants as the sector strives to improve energy efficiency.


These provide twice the levels of thermal efficiency - around 80% - of a conventional electricity generating station.


Story by Andy Scott