Utility Week

UTILITY Week 23rd January 2015

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28 | 23rd - 29th January 2015 | utILIty WEEK Markets & Trading Tricks of the trade Jillian Ambrose "The energy price cuts constitute a tepid price war" The public outrage over the recent spate of energy price cuts is almost as vitriolic as before they'd been passed through. Apparently, the only thing worse than not lowering bills following a year of plummeting gas and power market prices is passing on a cut which doesn't pass muster. Consumer groups have railed against the sub-5 per cent price cuts offered by Eon, British Gas and Scottish Power – especially seeing as the last two of the The cuts "feel half-hearted" and constitute a "tepid price war". Even as Labour threatened to force the cuts through them- selves, there was very little detail about exactly how far they'd go, or when they'd be happy that the price is right. If politicians, consumer groups and the public don't know what they can reason- ably expect, is it any wonder that they're perpetually disappointed? three are only planning to pass those on as winter finally ends. But as is so oen the case when it comes to market matters played out in the national media, there seems to be more noise than constructive debate. The big six are pretty con- sistent with their argument: wholesale prices are just half the story, and the other half of the story is pushing up prices. Don't forget to halve those losses again though, because much of the energy used today was bought before the past year's market falls. And the argument from consumer groups? "It's not good enough." This week UK power price index hits lowest ever point Bearish gas prices see Icis Power Index at a 16 per cent discount to its value this time last year The power price index produced by market specialists at Icis has hit its lowest ever level, as bear- ish gas prices continue to drive down the cost of generation. The Icis Power Index (IPI) is now at a 16 per cent discount to its value this time last year, having closed at a fresh low of £44.565/MWh on Thursday 15 January. The index launched last year but calculates forward power prices from 2011, which have all exceeded Thurs- day's close. "Longer term, the index was down 20 per cent since mid-2011, underlining how far wholesale electricity prices have fallen over the past three years," said Icis power editor Jamie Stewart. The losses followed steadily falling UK wholesale gas prices. According to Icis, the price of gas for this winter has fallen 29 per cent since the beginning of last year. Icis gas editor Ben Wetherall said weaker gas price lev- els look set to continue over the next two to three years. "The current UK wholesale gas price for delivery in 2016 and 2017 is only marginally higher than prices for deliv- ery between now and April. Notwithstanding any global price shocks, in any competitive market like the UK there should be more downward pressure on the wholesale price component of energy bills through 2015," he said. However, Wetherall added that the lower cost of wholesale gas might not translate into lower consumer bills. "The wholesale price remains the largest compo- nent of a standard household gas bill, but non-energy related factors such as transportation and green costs are an increasing part of the overall bill," he said. JA ELEctrIcIty EDF's Dungeness B to run until 2028 EDF Energy's 1GW Dungeness B nuclear power plant will continue to supply the UK with electricity until 2028, following a lifetime extension of ten years. The nuclear operator said in a statement that it will invest £150 million to extend the life of the station, which first began generating power in 1983, due to the certainty provided by the government's capacity market scheme. "The case for investment in Dungeness B and other nuclear power stations has been sup- ported by the existence of the capacity market – one of the reforms of the electricity market which gives investors confidence in highly challenging condi- tions," said the company. The UK's first capacity market auction took place in December last year for delivery of power in winter 2018/19, through which EDF Energy secured contracts for 28 out of its 29 existing gen- erating units. The successful units included Dungeness B, which secured a one-year contract alongside the Sizewell B, Hinkley Point B, Heysham 1, Heysham 2, Hartle- pool, Torness and Hunterston B nuclear power plants. The investment in Dungeness B's improvement projects has already included a £75 million upgrade to control room computer systems and £8 million on enhanced flood defences, EDF said. EnErgy Ovo Energy hires new head of trading Ovo Energy has hired the former head of GDF Suez's energy trad- ing desk to lead its wholesale market trading activities. Stephen Harris is set to join the growing independent sup- plier as head of trading from 23 January, aer 11 years with the French-owned business energy supplier. A market source familiar with the role told Utility Week that Ovo was looking to hire a candidate with experience in both the UK and Continental European power markets, which could signal an expansion of its activities in this direction. A spokeswoman for the sup- plier said the company has no comment to make on the poten- tial for a European expansion. Harris's departure from GDF Suez follows his step down as head of the UK's Power Trading Forum, which represents key UK power market participants. He told Utility Week that he is excited to join Ovo, adding that it is the "right time for a change". He replaces Tom Griffin, who will move to a new role within the company. Losses follow falling UK wholesale gas prices

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