Utilities Market Knowhow!

As of the 12th September, Gas and Electricity Year Ahead Wholesale costs were higher when compared to last month’s report.

Oil is up from $59 to $60 a barrel, showing little movement during the period. A lack of forecast economic growth counters OPEC and Russian attempts to maintain a high Oil price, by extending their production cuts through to March 2020. Despite some signs of progress, the trade dispute between the US and China continues.

Coal prices fell further. European imports were down 19% and it is expected there will be weaker demand through Asia in the short term. This may result in production cuts in order to stabilise and stimulate prices. Coal provided 1% of our Electricity generation in August.

Electricity prices have increased over the last few days following news that there may be safety issues with Nuclear reactors in France. We have since had more optimistic reports, but we await an official position from the French authorities. Their closure could mean Electricity shortages in France, the need for them to import rather than export and additional demands on other sources of generation, such as Coal and Gas.

Gas has also seen price pressures. The Dutch government announced the early closure of the Groningen Gas Field and legal restrictions have been placed on Gazprom’s use of the German OPAL pipeline, which supplies Gas from Russia. Alternate arrangements will likely be made.

Over the next couple of weeks, the Met Office is forecasting average temperatures. There will be a split between the south, where it is generally expected to be warm and dry, with colder nights and the north, having more unsettled wet and windy conditions. Nothing here to cause demand issues.

The National Grid have said that a Brexit deal will not impact on our Interconnectors to Europe. There is more uncertainty as to what may happen if we exit without a deal on the 31st October, which the government still says is a possibility. Sentiment can be a big factor for Wholesale costs.

What does this mean for me?

Wholesale prices had been lower before the recent events. Their direction will to some extent depend on the outcome of the EDF Nuclear reactor issues in France. Positive news should allow for a gradual correction to lower prices, although our graphs show that historically prices start to pick up in the Autumn into the Winter. The influence of higher third-party costs is increasingly noticeable in Electricity contracts. These include Transportation, Distribution and government policy levies. It is estimated, the Wholesale element makes up in the region of 45% of the Electricity bill and that is excluding the supplier margin, metering and VAT.

Should you require further information, please contact your lpm Estates Manager 

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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