UK Power-Forwards drift up, focus on tighter supply

Sept 8 - British forward electricity prices ticked higher on Monday with traders reluctant to sell because of forecasts of tighter supply this winter. Prices slid sharply early last week, after rallying for much of August, but then found support and started drifting upwards again on Friday.

"Because capacity is quite tight this year, the natural tendency is up," said one trader, adding volume was light. Winter 03 rose to 23.05 pounds a megawatt hour, up about 10 pence from Friday but 70 pence below a two-year high seen last Monday. Summer 04 gained about 15 pence to 17.95 pounds while winter 04 was up a similar amount at 23.10 pounds. One trader said summer contracts from 2005 onwards had risen more than winter recently, partly because companies may shut down coal-fired plants in summer to comply with Europe Union emissions rules due to come into force in early 2005. "From beyond 2005, people will be thinking about not running their coal-fired plant in summer and save it for winter," said the trader, who works at a large generator.

He pegged summer 05 at 20.65/20.70 pounds, a premium of 2.75 pounds to summer 04, and winter 05 at 26.65 pounds. In the prompt market, prices were soft with day ahead at 15.00 pounds, down a pound on the forward price for Monday, and the rest of the week at 15.50 pounds. Prices reflect low gas prices caused by the closure on Monday of the UK/Belgiun gas pipeline for two weeks maintenance which will halt exports and leave extra gas in the UK market. Next week was well traded at the 18.25 pound mark, reflecting forecasts of tighter supply. Traders said the contract had fallen in recent days on the back of lower gas prices.

Traders took advantage of the low UK prompt prices to export the maximum amount of power to France. All 500 megawatts available in day ahead auctions on the UK/France interconnector was sold at 140 euros a megawatt. No day ahead capacity was sold in the opposite direction. In France, day ahead baseload was trading at 32 euros, or about 22.37 pounds.