UK Electricity Prices hit 22-Month High as Nation Shivers - and More is on the way

By Icis Heren, PRNE
Sunday, November 28, 2010

LONDON, November 29, 2010 - The wholesale electricity price for power to be delivered on Tuesday 30
November hit a 22-month high on Monday as the big freeze extended its hold on
the UK into a second week.

Power to be delivered on Tuesday was traded on the UK power market at an
early high of GBP67.00/megawatt hour (MWh). The last time it recorded a
higher closing price was 8 January 2009, according to ICIS Heren historical

The country has had six major nuclear power plants out of action since 15
November which, coupled with continuous spikes in demand, has tested the
nation's power generation capacity as heating is ramped up to fend off the
big chill.

The six nuclear plants account for a combined power generation capacity
of 3.3GW, with British demand on Monday expected to peak at more than 58GW.
The UK has an installed power generation capacity of around 66GW according to
National Grid.

Extreme cold weather in neighbouring markets has exacerbated the
situation. The UK was exporting power to continental Europe through the
2-gigawatt (GW) UK-France interconnector cable early on Monday morning as
French and UK power generators jostled to ensure consumption could be met.

"Energy desks have been scrambling to ensure that they hold enough power
to cover demand over the coming days in a febrile trading environment, which
has boosted prices," said ICIS Heren's UK electricity market analyst, Jamie
. "The power system is coping, but the 22-month high is a reflection
of just how tight the supply picture is so early into the winter."

And the situation is set to continue. The Met Office issued a severe
weather warning covering the entire east coast of the UK on Monday, with the
country set to shiver in sub-zero temperatures for the rest of the week.

By Friday, Scotland is expected to freeze as daytime temperatures plummet
to minus eight degrees.

UK electricity suppliers buy their power at wholesale prices, so
short-lived price spikes will not affect consumer prices directly. However,
if wholesale prices stay high with stronger demand, this increase could feed
through to retail prices.

The wholesale price hikes come at a time of heightened sensitivity around
energy retail prices after British regulator Ofgem announced its intention to
investigate competition in residential energy markets, following an estimated
38% increase in suppliers' profit margins.

Note to editors:

For the month so far, the UK Baseload price for power delivered during
working days in November has averaged GBP45.14/MWh. Last year, the Baseload
price for working days during November averaged GBP33.68/MWh, the maximum
price during this period was GBP36.75/MWh on one day.

The UK-France interconnector allows up to 2GW of power to flow in either

Interconnection between different electricity markets is an important
part of EU policy, as it means that markets with excess generation can supply
power to other markets.

The ability to import and export electricity is key to security of
supply, both for the UK and other markets. Without interconnectors, each
country would have to ensure that there was enough installed capacity built
to cover the worst-case scenario.

The UK has a 450MW link between Scotland and Northern Ireland, and will
connect to the Netherlands via the 1GW BritNed interconnector, due to become
operational in April.

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    Jamie Stewart
    Electricity Market Analyst
    ICIS Heren
    t: +44-20-7911-1933

Jamie Stewart, Electricity Market Analyst, ICIS Heren, t: +44-20-7911-1933,
e: jamie.stewart at

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