Utility Week

UTILITY Week 16 05 14

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UTILITY WEEK | 16Th - 22nd MaY 2014 | 27 Markets & Trading This week Tankard's new index 'more transparent' Established pricing agencies face direct compe- tition from price index launched by major brokers The UK's largest gas market brokers have said they will together publish reference prices for the UK gas market that are "more transparent, accountable and objective" than benchmarks provided by established price- reporting agencies (PRAs). Icap Energy, Marex Spectron and Tullett Prebon already offer Tankard indices based on a close of 17.30 London time, but the new benchmarks will be set for the 16.30 market close, in direct competition with established PRAs. PRAs offer price benchmarks across commodity markets, based on information gathered from a wide cross-section of the market, including verifiable trades. But over recent years they have been dogged by criticism that the benchmarks are open to manipulation, with fewer market players willing to provide trade data. Tankard said: "While PRAs play an important role in less liquid markets, highly liquid markets such as natu- ral gas are demanding a benchmark based on verifiable trades, since market participants are reluctant – and in some cases are refusing – to communicate at any level with the PRAs." However, concerns also exist over Tankard's indices. Its three brokers cover 80-90 per cent of the over-the- counter EU natural gas market, but this excludes smaller brokers such GFI, TFS and Griffin. The new offerings cover gas for day-ahead delivery and weekend delivery on the UK and Dutch gas markets, reflecting a volume-weighted average of all trades in the five minutes before 16.30 London time. JA ELEcTrIcITY EU carbon emissions fell 2.5% last year European Union carbon emis- sions fell by 2.5 per cent in 2013 compared with the previous year. Figures released by the Euro- pean Commission revealed that the EU28 countries collectively saw emissions from fossil fuel combustion fall by 2.5 per cent during 2013. In 2012 they fell 1.6 per cent. The UK saw emissions fall 2.4 per cent during this period, but it was still the second highest emitter, having released 455 mil- lion tonnes of carbon dioxide. Germany saw its carbon emissions increase 2 per cent in 2013. It also had the highest level of carbon emissions, releasing 760 million tonnes. The biggest falls in carbon emissions were recorded in Cyprus (14.7 per cent) and Roma- nia (14.6 per cent). Gas UK gas prices at three-year lows The price of gas on the UK's NBP wholesale market is at three-year lows, with weak pricing levels to persist through the summer, due to still-healthy storage levels aer an unusually mild winter. In a report on the market out- look for this summer, analysts at Thomson Reuters Point Carbon said this week that the UK gas market will remain bearish during the second half of May, June and at the end of July as consumption is forecast to be lower than supply. UK gas prices for prompt delivery are almost 30 per cent lower year on year, in line with lows not seen since October 2011. The UK's gas storage levels are healthy for this time of year, meaning there is less demand for gas for storage injection, which lowers the market price. In addition, over the early months of summer, supplies of LNG are expected to be healthy before dropping sharply from July in line with an upli in demand from Asia as tempera- tures boost electricity demand for air-conditioning. But by this time, UK storage levels will be even higher, the analysts note. "Despite some bullish ele- ments toward the end of the summer such as supply mainte- nance and less LNG, bearish fac- tors are set to dominate market sentiment," said Point Carbon analyst Oliver Sanderson. He said ample supply will keep UK gas prices "substan- tially below" last year's level throughout the summer, mitigat- ing the risk posed by political turmoil in Ukraine. Point Carbon estimates that by September, the UK's storage stocks will have reached 95 per cent, helping to offset potentially lower supply availability. Only verified trades will be included Tricks of the trade Jillian Ambrose "Jump to transparency – it won't always be optional" "Transparency" is a watchword that energy companies have had to get used to. The alleged lack thereof has sparked angry rants from everyone from politicians to market whistleblowers, while energy company chief executives issue earnest promises of greater clarity across bills, financial reporting and even tax arrange- ments. But when it comes to estab- lishing transparency in the wholesale markets, many com- panies maintain a cagier stance. But the fact remains: many of the same utilities already on the ropes over a failure to be trans- parent are point-blank refusing to help increase transparency within their own market. The transparency bandwagon shows no sign of slowing and the markets are not immune. What energy companies should be doing is figuring out how to par- ticipate with PRAs on their own terms before politicians intervene. Jump or be pushed – transpar- ency won't always be optional. This week, a trio of brokers offered the latest in transparent market pricing with a new set of indices using trades from their own platforms, without the need for trader submissions. Why? Because price reporting agencies (PRAs) with decades of experi- ence providing daily market data are apparently no longer good enough if traders don't trust them enough to speak to them. With allegations of bench- mark rigging hitting the headlines in recent years, it's no surprise traders would rather not take the risk of speaking to a market reporter who might have an eye on implicating them in the next big market "scandal".

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