Headlines:
- Gas and Electricity Wholesale prices are similar to last month
- EU Gas Storage levels are 49% full compared to 70% last year
- Trade tariffs may have a further impact on energy costs
Energy Overview
As of the 2nd of June, Gas and Electricity Year Ahead Wholesale costs were similar to those in last month’s report but lower than last week.
It is still not clear what tariffs will eventually be applied by the US and how nations will retaliate. A legal challenge in the US could see most of them cancelled. Should the outcome be seen to damage the global economy, then energy prices may once again move downwards. Of course, the opposite is also possible.
EU Gas Storage levels remain very low at 49% full compared to 70% last year. The winter target of 90% has been reduced to 83%. The industry will become increasingly nervous if Storage remains low as we approach the winter, especially if there are forecasts for periods of prolonged below average temperatures.
High Winds towards the end of May meant that for two days we were net exporters of Electricity to the continent, whereas we normally import large volumes through the Interconnectors, notably from France and Norway. This also meant we used less Gas for generation.
OPEC+ has once again increased Oil output, which is helping to keep prices low and applies pressure to rival producers such as the US, who generally have higher production costs.
What does this mean for me?
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 see 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 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.
Gas market overview
On the 2nd of June, the Gas Year Ahead Wholesale cost was 88.04p/th, down from 88.65p/th in last month’s report and 9% less than 2024.
We saw a gradual recovery of Gas prices through most of May, after the losses seen when tariffs were announced. However, towards the end of the month we saw further losses. It is still not clear what tariffs will be imposed, and most may be cancelled after a legal challenge. Prices are likely to be influenced by the perceived impact they will have on the global economy.
The EU is struggling to fill Gas Storage and has reduced the target from 90% full to 83% for the start of the winter. As levels are currently just 49% compared to 70% last year, there will be an effort to purchase any available Gas through the summer months, which will add a price pressure. With plans for the EU to stop using Russian Gas by 2027, it will be hoped that LNG output increases in line with the growing demand. The EU will also need to become more energy efficient and increase the use of Renewables energy. As China looks to stop buying US LNG in favour of the Middle East and Russia, more shipments should head to Europe. It is looking increasingly unlikely that peace talks between Russia and Ukraine will allow for additional Russian Gas to be available in 2025.
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.
Electricity market overview
On the 2nd of June, the Electricity Year Ahead Wholesale cost was £79.12/MWh, down from £80.14/MWh in last month’s report and 9% less than 2024.
Electricity price direction generally follows Gas, and we saw increases through much of May as markets stabilised after the reductions following the introduction of tariffs, with the belief that energy demand could be reduced. The level of tariffs is still unknown, so they could once again influence prices in either direction. Prices began to ease towards the end of the month.
Strong Winds in May increased its contribution to 23% of generation from 19% in April, which has continued into June. Although this meant there were days when we were net exporters of Electricity to the continent, we still imported 18% of our demand via the Interconnectors. The use of Gas fell from 28% in April to 22%, with a daily low of 7% and high of 40%. This large variation underlines the need to invest and diversify generation types as well as increase our Storage capacity. The costs for these are recovered through energy bills rather than general taxation.
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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