Headlines:
- Gas and Electricity Wholesale prices are up
- EU Gas Storage is higher than most expected
- The conflicts in Ukraine and Gaza continue to impact on prices
Energy Overview
As of the 6th of October, Gas and Electricity Year Ahead Wholesale costs were higher than in last month’s and last week’s reports. Oil is lower at $65 a barrel as OPEC+ continues to announce monthly increases in production.
The heating season has started which means that more Gas will be used to heat homes and businesses rather than be diverted into Storage. It also means that Storage will start to be used, with the industry keeping a close eye on levels through the winter. This impacts on prices for 2026 and 2027 as low stocks in 2026, following this winter, will need to be filled in readiness for the next.
The US and the EU are looking to apply more pressure in the form of sanctions and tariffs against Russia and its trading partners. The EU is considering introducing restrictions on Russian Gas Imports in 2026, a year earlier than initially planned. Should these measures be effective, an end to the war will likely not mean more Gas flowing into Europe, but will help the global movement of energy. The proposed Gaza peace deal reduced costs as conflicts in the region can have an impact on Exports of Oil and Gas.
September saw a 31% contribution of Wind to generation, from 22% in August. Gas was 24% and Imports via the Interconnectors 16%. Last week’s storm Amy meant much higher Wind at 37%, Gas at 25% and Imports just 13%.
Other Industry Costs
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.
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), increased 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 potentially lower the Band which determines Transmission and Distribution fixed charges.
Balancing costs, which pay to fine tune Electricity supplies to avoid power cuts are increasing and the Energy Intensive Industries charge has been introduced, providing relief from various industry costs for some customers.
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 6th of October, the Gas Year Ahead Wholesale cost was 82.24p/th, up from 81.52p/th in last month’s report and 14% less than 2024. Prices are higher than last week.
EU Gas Storage levels are now 83% full, which is more than most expected, but still below the 90% target. Although the heating season has started, there is still the potential for more Gas to be added before withdrawals begin, as we saw last year. However, as levels are low, there is still the risk that a long cold spell or supply outages could create some nervousness and increase costs. Competition for LNG deliveries will be another area to watch, should demand from both Europe and Asia be high.
Global events are continuing to have an influence. The recent attack by Russia on Ukraine’s Gas infrastructure saw prices increase. There is continued optimism that by winter 2026/2027, the mounting economic pressure on Russia will see peace and some of the global restrictions on the movement of energy can be lifted. There is also hope that the Gaza peace deal will be agreed and implemented, which reduces the risk of disruption to Gas and Oil from the region.
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 6th of October, the Electricity Year Ahead Wholesale cost was £79.09/MWh, up from £77.85/MWh in last month’s report and similar to 2024. Prices are higher than last week.
The use of Gas to generate Electricity means that Wholesale power prices tend to closely follow Gas. This will be noticeable with the start of the heating season, where the amount of Gas in Storage has a big influence on costs. With low Storage levels, any incidents are likely to have an exaggerated, although sometimes short-term reaction. This was the case with Russia’s attack on Ukraine’s Gas infrastructure last Friday.
Storm Amy provided high levels of Wind last week, at over 50% of generation through Friday to Sunday. For the week, Wind was 37% and Gas just 25%, with Imports via the Interconnectors at 13%.
The introduction of the relief for Energy Intensive Industries (EII) has meant that customers are likely to start seeing energy suppliers add this into energy bills. The relief allows EII companies to claim back a % of costs for a number of industry charges to help them be competitive. The cost of the scheme is charged to everyone else.
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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