OnlineDIRECT Market Report 19th August 2019


Key Headlines


Seasonal power and gas contracts moved significantly lower over the last two weeks.

Similarly, global commodity prices also fell. The price of EU carbon emissions plummeted 9.8% to €26.3/t, their lowest level since early July, whilst coal prices lost 4.7% to $64.5/t.

Looking ahead:

Seasonal contracts are likely to remain close to current levels over the next two weeks with the potential to move lower.

Coal and carbon prices are expected to decrease in the coming weeks, amid weak demand for coal-fired generation and ongoing uncertainty around Brexit.

Additionally, conflicting factors will continue in the oil market likely leading to increased volatility but little overall change.

Third party charges and industry updates:

Ofgem announced that the default price cap will fall from £1,254 to £1,179 from 1 October, with a fall in wholesale prices cited as the main reason for the decrease. Ofgem announced a change to the electricity transmission licence which will allow National Grid ESO to reconcile any differences between forecast and actual incentive payments through Balancing Uses of System charges during the year, rather than retrospectively.




Wholesale Power and Gas


Power contracts have experienced notable drops since the start of August, driven by a significant fall in gas and commodity prices.

The winter 2019 power contract lost 5.0% to £53.9/MWh, while power for delivery in summer 2020 declined 3.4% to £48.9/MWh.



Falling oil prices helped to push gas prices down, with winter 2019 gas losing 4.6% to 48.7p/th. The summer 2020 contract slipped 2.8% to 45.0p/th.

Brent crude oil prices dropped 4.2% to $59.2/bl, amid continuing concerns of a slowdown in global oil demand due to the ongoing US-China trade war and news that Germany’s economy shrank in the second quarter of 2019.






Third Party Charges and Industry Updates

Default price cap to fall £75 with Ofgem citing lower wholesale costs

The level of the default price cap will fall from £1,254 to £1,179 from 1 October for this winter period (October-March), while the pre-payment meter cap will fall from £1,242 to £1,217 per year for the same six-month period. Published by Ofgem on Wednesday 7 August, the move will impact the bills of up to 15mn households who are protected by the price caps. Wholesale energy prices have also fallen between February and June, resulting in the reduction of both caps. “The energy bills of around 15mn customers on default deals or pre-payment meters will fall this winter to reflect the reduction in cost of the wholesale energy,” confirmed Chief Executive of Ofgem Dermot Nolan.

NGESCO incentive payment to be recovered through BSUoS

Ofgem announced on Friday 9 August its decision to modify the electricity transmission licence held by National Grid ESO to provide more certainty on the recovery of the licensee’s incentive payments. The change will allow ESO to reconcile any differences between its forecast incentive payment and actual incentive payment through adjustments to Balancing Service Use of System (BSUoS) charges during the year when Ofgem makes its decision, rather than retrospectively via settlement runs for the incentive year itself. The regulator considered the modification to increase the certainty around the charges market participants face as a result of incentive payments incurred by ESO. The change will take effect from 4 October.

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