Wholesale power and gas prices dropped significantly over the last two weeks with some contracts falling to their lowest levels since August 2018. A significant drop in the price of carbon emissions certificates and lower gas prices helped pushed power prices lower. Gas prices were themselves driven lower by strong gas supplies and a slight decline in oil prices.
Prices are expected to remain close to their current levels over the next two weeks with the potential to decrease slightly. Forecasts of milder temperatures and comfortable gas supplies are likely to prevent gas prices from rising and could see them fall further. With gas still accounting for around 40% of the electricity generation, these movements will feed through into power prices.
Third party charges and industry updates:
The government published a draft version of the rules for the third Contracts for Difference auction which is due to take place in May 2019. The publication confirmed a budget of £60mn for the auction to subsidise renewable projects to begin generation from 2023. BEIS also launched a consultation on proposals to raise the awareness of smart meters among non-domestic consumers. It aims to improve the take up of smart meters among microbusinesses and enable greater cost savings.
Wholesale Power and Gas
Seasonal baseload power contracts out to winter 2021 dropped notably in the last two weeks, following gas and global commodity prices downwards. Power for delivery in summer 2019 fell 9.4% to £51.8/MWh, whilst power for delivery in winter 2019 lost 6.0% to £59.9/MWh. Both contracts are at their lowest price since August 2018. Power prices were pushed lower by falling gas contracts and a significant drop in carbon prices, whilst the commissioning of a new interconnector with Belgium, known as NEMO, has improved Great Britain’s security of supply.
Seasonal gas prices out to summer 2021 also decreased. Gas for delivery in summer 2019 plummeted 12.8% to 48.2p/th, the lowest it has been since June 2018, and gas for delivery in winter 2019 slipped 6.7% to 60.0p/th. Ongoing deliveries of Liquified Natural Gas cargoes into GB has continued to cause gas prices to drop, with a comfortable supply outlook for GB.
Supplier Tariff Movements
In December, 15 suppliers moved down one or more bandings whilst 11 moved higher. The greatest decrease in dual fuel tariff prices was seen by Scottish Power with its standard variable tariff dropping by £120/year to bring it in line with the price cap of £1,137/year. Utility Point replaced Powershop as the market leader with an 18-month dual fuel fixed deal priced at £903/year. Overall, only 16 tariffs available in December 2018 were priced below £1,000/year, compared to 87 in the previous year.
Domestic tariff movements are a useful proxy for small and medium sized business rates, as the bills are largely made up of the same components.
Third Party Charges and Industry Updates
BEIS unveils rules for third Contracts for Difference (CfD) auction
On 21 January government published the Draft Allocation Framework for the third CfD auction, which is set to take place in May this year. This sets out the rules by which the auction will be undertaken, confirming a budget of £60mn for renewable projects to begin generation from 2023. If the entire £60mn budget is spent it could increase the amount that consumers pay to subsidise the scheme by around £0.2/MWh, but this will not have an impact on bills until 2023.
BEIS launches consultation to improve smart meter awareness
BEIS launched a consultation on proposals to raise the awareness of smart meters among non-domestic consumers. The consultation, published on 24 January, proposed two changes to the non-domestic smart meter rollout. One change aims to tackle low awareness of smart meters amongst microbusinesses to improve take up and enable greater cost savings, while the second will consider approaches for the way non-domestic consumer data is made available to consumers and how this could encourage better engagement with the rollout.
By OnlineDIRECT Marketing Team