As of the 1st of September, Gas and Electricity Year Ahead Wholesale costs were lower than in last month’s report but comparable to last week.
August saw Wholesale prices fall as the US delayed applying sanctions against Russia, with Presidents Trump and Putin meeting to discuss ending the war in Ukraine. President Trump, Zelensky and EU leaders then met in Washington, with the next phase to be a meeting with Putin. At this point, energy markets saw an opportunity that the potential relaxation of sanctions could allow more Russian Oil and Gas to be exported globally and reduce tight supply margins. Unfortunately, but somewhat predictably, Russia has avoided a commitment to further direct discussions and energy costs have increased. Despite additional US tariffs against India due to them buying Oil and weapons from Russia, India appears to be resisting and is being pushed into a closer alliance with Russia and China.
EU Gas Storage remains low as we head into the winter, with its additional heating demand. LNG shipments from the US are on an upward trend, with good investment signals from the US government and the EU as a buyer.
The contribution of Wind to generation increased to 22% from 16% in July, reaching almost 50% on the 31st of August and the 1st of September. Gas provided a slightly lower 25% and Imports from Europe were a stable 20%.
The energy industry has changed how it recovers Electricity Distribution, Transmission and Balancing costs, under the Targeted Charging Review. This has moved some charges away from being based on the energy used and billed in the unit rate, to fixed charges incorporated within the Standing Charge or as separate items. This should give both the customer and the industry a more accurate way of calculating budgets, but the change has become noticeable within energy bills and created concern. Over the next two years, there is a quite confused picture of increases and decreases in Transmission and Distribution charges, which energy suppliers will be billing customers.
From April 2025 customers will have seen an increase in Transmission costs with an expectation of further increases from April 2026. Distribution costs are a little more complicated with the average fixed annual cost decreasing across networks from April 2025, remaining similar in 2026. Another element, the Available Capacity (AC), increases significantly for most from April 2025, with small reductions in 2026. This does mean that by managing the Agreed Supply Capacity, there is an opportunity to reduce the AC cost and longer term possibly lower the Band which determines Transmission and Distribution fixed charges.
Balancing costs, which pay to fine tune Electricity supplies to avoid power cuts, will increase from October 2025.
Indigo Swan works closely with energy suppliers to help all our customers understand and manage changes.
Please contact us on 0333 320 0475 to discuss options or to get a latest update.
On the 1st of September, the Gas Year Ahead Wholesale cost was 81.52p/th, down from 88.46p/th in last month’s report and 19% less than 2024.
EU Gas Storage levels are still much lower than 2024 at 78% full compared to 92%, but are likely to reach the revised target of 83%. This is a more positive position and has reduced a price pressure, but it does mean there will be a greater reaction if a prolonged cold spell is forecast. The US is increasing its shipments of LNG to Europe, which will remain an important source, with the reduction of flows from Russia.
China has taken delivery of sanctioned Russian LNG. It also receives piped Gas with a further pipeline being considered. This is giving Russia a valued market now that the EU is looking to cease Russian Gas Imports by the end of 2027.
Peace talks to end the war in Ukraine took place in August. Their progress and the approach taken by the US against Russia and its trading partners, could have an impact on the cost of Gas, moving prices higher or lower.
We would encourage those with Gas and Electricity contracts that are due to end in the next few months and potentially further out, to engage with Indigo Swan and monitor positions closely.
On the 1st of September, the Electricity Year Ahead Wholesale cost was £77.85/MWh, down from £80.30/MWh in last month’s report and 9% less than 2024.
Electricity prices closely followed Gas due to its high cost for generation compared to other sources. Gas initially saw significant reductions in August when there was hope that global supply pressures may ease, should there be a peace deal between Russia and Ukraine. The lack of progress has since seen prices move higher. Gas is also under some pressure due to low EU Gas Storage levels, which are creating a little nervousness as we head toward winter’s higher demand.
August saw an increase in Wind’s contribution at 22% from 16% in July, Gas was 25% from 26% and the Interconnectors with Europe were an unchanged 20%. Over the last week, Wind has been a much higher 34%, peaking at almost 50% for two days, resulting in us Exporting Electricity to the continent. Although this is positive, it is likely that there will be additional Balancing costs paid to some generators to stop producing. As temperatures cool, the risk of lower output from Nuclear and Hydro, will ease.
We would encourage those with Gas and Electricity contracts that are due to end in the next few months and potentially further out, to engage with Indigo Swan and monitor positions closely.
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