August 11, 2022 11:34 AM EDT

European power prices rose to fresh records on Thursday as a heat wave limits energy supplies and wildfires rage across France.

The gains reflect a tight market for natural gas—used to fuel power plants—as Russia cuts supplies just as Europe works to replenish stockpiles for winter. A drop in nuclear-reactor output, as well as low wind and hydro generation, has exacerbated the squeeze, raising the specter of intervention to reduce demand.

“If Russia cuts off the gas and there might not be enough gas for the whole demand, then there would be rationing,” Annegret Groebel, president of the Council of European Energy Regulators, said in a Bloomberg Television interview. Blackouts “can be avoided, but of course it requires a lot of preparatory work that we are currently doing.”

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Benchmark German power for next year rose as much as 6.6% to a record 455 euros a megawatt-hour on the European Energy Exchange AG. The French contract was up as much as 7.8%, rising to 622 euros a megawatt-hour. That’s about $1,100 for the equivalent energy of a barrel of oil.

Heat waves this summer have intensified demand while adding to supply disruptions, with key waterways—which are used to generate hydropower, cool nuclear plants and ship energy commodities—drying up.

France is in a particularly dire situation, as more than half of its nuclear fleet is offline for maintenance. Normally the nation would be exporting power, but this year it has become a net importer, leading neighboring countries to burn more gas to keep the lights on. Wildfires have been raging in the country, leading President Emmanuel Macron to to enlist help from across Europe to join 10,000 French firefighters to battle the blazes.

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“Historically-low nuclear power output and low hydro reservoirs across Europe are leaving a shortfall in supply that can only be met with dispatchable sources like coal and gas,” said Patricio Alvarez, an analyst at Bloomberg Intelligence. “This adds to the resilience of gas demand at a time of dwindling supply from Russia.”

The tight power supplies led the UK to issue a warning about a narrow margin between supply and demand on Thursday evening. While National Grid ESO, the country’s grid operator, said there will be sufficient generation, it’s another sign of the difficulties faced by Europe’s electricity system this year.

With assistance from John Ainger.

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