As of the 4th of October, Gas and Electricity Year Ahead Wholesale costs are higher, when compared to last month’s report. The Oil price is higher at $81 per barrel, from $72. OPEC may further increase production when they meet.
Gas prices have seen extreme volatility as a number of factors contribute to a sense of nervousness for supplies going into the winter. This is despite a big improvement in Gas Storage levels, which are now higher than 2019 and 2020.
With Gas continuing to be relied on for Electricity generation due to low Wind levels through September, Electricity has seen a similar price movement.
These conditions have created issues for some energy suppliers. In the domestic market, a number have ceased trading due to the losses being made by purchasing energy above the government’s Price Cap. For business contracts there have been some underestimates of consumption levels, also exposing them to buy energy well above the contracted rates. This may mean they are forced to review existing arrangements.
The Met Office forecast for the next month suggests unsettled conditions with temperatures in the region of seasonal norm, with some night frosts and Wind being more focused in the north.
Wholesale prices for 2021 and early 2022 are very high when compared to recent years. Prices for later in 2022 and 2023 show much better value. Generally, the Wholesale element makes up in the region of just 40% of the total cost of an Electricity bill and 60% for Gas, but these percentages are currently much higher.
Increasing third-party costs are noticeable in Electricity contracts. These include Transmission, Distribution, and government policy levies, which ensure we have enough energy to meet demand and provide investment.
Over the next year or two, the way some of these charges are calculated will change, under the Targeted Charging Review. Energy suppliers can choose whether to fix Electricity contract costs, pass them through or leave that decision until a later date. This does allow for the possibility of a review of the Distribution charges in some fixed price Electricity contracts from April 2022. It is very likely the Transmission element will be delayed until April 2023.
Wholesale prices are likely to remain high despite improved Gas Storage levels, due to other supply concerns. There may be some relief should there be indications of a milder winter.
We would advise looking at your options for contracts ending 2021. There is an opportunity to contract for two or three years to take advantage of the lower longer-term prices and dilute the impact of the higher short-term costs.
Please contact us on 0333 320 0475 to discuss options or to get a latest update.
On the 4th of October, the Gas Year Ahead Wholesale cost was 174.39p/th, up from 106.52p/th in last month’s report and 393% higher than 2020. Prices from quarter two of 2022 are considerably lower.
Gas Storage levels in the UK are now higher than 2019 and 2020, which does give some confidence heading into the winter. However, the continued lack of LNG deliveries which we have come to rely on due to a low Storage capacity, does create that level of uncertainty in supplies, should there be a very cold winter.
European Gas Storage levels do remain a concern, being just 75% full, with lower levels of Gas being delivered by Russia. This disruption to supplies and the global competition for LNG, is driving up international Gas prices.
Once again Gas compensated for low Wind levels in September, by providing 43% of Electricity generation.
The seasonal norm temperatures due this month should avoid any excessive demand on Gas for heating and there may be an improvement in the Wind contribution, relieving some pressure on Wholesale prices.
Let us know if you would like us to research your options for 12, 24 and 36 month contracts.
On the 4th of October, the Electricity Year Ahead Wholesale cost was £171.49/MWh, up from £105.96/MWh in last month’s report and 271% higher than 2020. Prices from quarter two of 2022 are considerably lower.
Electricity prices have followed Gas very closely due to it providing a high 43% of generation in September. October will potentially see an improvement from the low 14% Wind contribution, which may provide some price relief.
In September a fire caused damage to our largest Electricity Interconnector, which allows us to import from France. This caused significant price movement as it is forecast to reduce imports by 50% until March 2022. Fortunately, the new North Sea Link has just become operational with Norway, which should shortly be able to fully compensate. We do have a number of other Interconnectors allowing both the Import and Export of Electricity, with others planned.
The National Grid has mechanisms in place, to secure additional supplies or reduce demand. These do come at a cost, in the form of higher third-party charges within Electricity bills, but provide an element of stability to prices which otherwise may react even more dramatically.
Let us know if you would like us to research your options for 12, 24 and 36 month contracts.
