Key Headlines

Wholesale:

All seasonal power and gas contracts moved lower over the last two weeks, while global commodity markets, with the exception of EU ETS carbon, were relatively stable. Healthy supply outlooks for both power and gas markets have continued to push prices lower.
Brent crude oil fell 0.4% to $61.4/bl, and the cost of carbon emissions lost just 0.3% to €24.9/t.

Looking ahead:

Power and gas prices are expected to rise in the coming weeks as temperatures are forecast to slip to well below seasonal normal levels. However, the impacts of this will be felt most in near-term contracts, but some upward movements could be felt in seasonal contracts.

A comfortable supply outlook for both power and gas markets, with high levels of LNG imports and more renewables electricity capacity commissioning, will continue to prevent any significant rises in seasonal contracts.

Third party charges and industry updates:

On 7 November, Ofgem confirmed that mutualisation will be triggered for the Renewables Obligation, with an initial shortfall in payments of £206mn. On 4 November, SSE confirmed that its 1.5GW coal plant, Fiddlers Ferry, will close by the end of March 2020. This follows an earlier announcement from RWE that it will close the Aberthaw coal power station, by the same date. These closures mean that GB will have 5.3GW of coal-fired generating capacity remaining.

Wholesale Power and Gas

Power:

All power contracts decreased in the first half of November. Power for delivery next summer declined 1.7% to £45.4/MWh and winter 20 power slipped 1.1% to £52.8/MWh.

Power prices followed the gas market lower, although price movements were less severe. In addition, SSE announced that the Fiddlers Ferry coal-fired power station will close by 31 March 2020, but the loss of this capacity will largely be offset by new renewables plant commissioning this winter.

Gas: 

Wholesale gas prices also fell during the last fortnight. The summer 20 contract dropped 3.7% to 39.3p/th and winter 20 gas lost 2.6% to 49.5p/th. The arrival of 10 LNG tankers during early November led to lower than normal withdrawals from gas storage sites. As a result, gas storage levels are higher than the same time last year and are contributing to a comfortable supply outlook. This should help to prevent any notable price gains in the near future, and could even weigh further on contracts.

Third Party Charges and Industry Updates

2018-19 RO mutualisation triggered

Ofgem confirmed on 7 November that mutualisation will be triggered for the 2018-19 Renewables Obligation (RO). Suppliers were obligated to either present RO Certificates (Rocs) or to make a buyout payment of £47.22 per Roc, or a combination of both, in order to meet their total RO by 1 September. 42 suppliers did not meet their obligations by this date and subsequently owed late payments, with an initial shortfall of £206mn. Ofgem also confirmed that a number of suppliers had failed to meet the 31 October late payment deadline, with the total missing payments being enough to trigger mutualisation. Mutualisation will act to slightly lift costs of the scheme for all other suppliers, and therefore consumers, in the market as the uncollected money will be recovered through the electricity bill.

Citizens Advice calls for TPI regulation

A new report by Citizens Advice published on 25 October, has illustrated the lack of protections given to the microbusiness sector, and details evidence of microbusinesses being needlessly disconnected, pursued for debts and mis-sold contracts by energy brokers. Additionally, microbusinesses face fewer protections when suppliers go out of business. The organisation has called on Ofgem, government and industry to introduce a number of measures: for government to introduce stricter regulation of energy brokers and other third party intermediaries (TPIs); for energy brokers and TPIs to be transparent on commission and any fees which appear on bills; for industry to improve debt and disconnection processes, and for Ofgem to protect microbusinesses’ credit balances if their suppliers fail.

Breakdown of Third Party Charges on the electricity and gas bill for 2019-20