Utilities Market Knowhow!

We saw continued increases to both the Gas and Electricity Year Ahead Wholesale costs in October and November, in particular gains to this winter’s months.

To illustrate. For us, this means we will have less imports available and indeed we are more likely to export to them, when their higher prices are more attractive.

In September, imports from France contributed 3% to our Electricity mix, whilst in October this was down to 1%. It is unclear when this issue is likely to be resolved.

The above has also directly impacted on Coal prices, as Coal generation within Europe has had to increase to compensate for lost Nuclear. China is also importing more. The 57% price increase on last year means our own Coal generation is not economically attractive, despite the higher Electricity price.

Initially news that OPEC would likely put some kind of production restriction in place, pushed the price of Oil to almost $54. Since then, indications are that full compliance is less likely, with for example, Iraq stating it needs higher revenues to pay for recent military activity. This news and high global inventories, means it currently is $46 and falling.

With 52% of our generation mix coming from Gas and the news that Rough (our largest Gas storage facility) would not be available for withdrawals on 1st November as expected, the supply concern impacted on costs.

The lower £ also made imports more expensive.

The US election result is another factor which may impact on the global markets and our own energy costs, with the potential to sway higher or lower. Despite the various issues that are built into prices, with the main concern being this winter, National Grid remains optimistic about both Gas and Electricity supplies through the colder months.

What does this mean for me…

The Year Ahead Wholesale price graphs show increases for Gas and Electricity. For contracts which need to be closed soon, it is worth considering contracting now, due to the volatility mentioned in this report. There is a great deal of uncertainty as to which direction prices will go, so for the more risk averse, early 2017 contracts should also be considered and closely monitor those further out.

Should you require further information, contact your lpm Estates Manager now.

Life Property Management work closely with utilities broker Indigo Swan, to bring the best energy rates to their clients. Indigo Swan’s Market Knowhow is a regular, comprehensive report on the position of the Utilities Market.

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Deacon is a trading name of Arthur J. Gallagher Insurance Brokers Limited which is authorised and regulated by the Financial Conduct Authority. Registered Office: Spectrum Building 7th Floor, 55 Blysthwood Street, Glasgow, G2 7AT.Registered in Scotland. Company Number: SC108909.