Energy costs: Markets slid sideways in late May, until a slump in oil prices alongside increases in wind and solar generation caused both short and long term gas and power prices to tumble into June. Looking ahead, LNG deliveries are expected to slow in June and temperatures to fall below seasonal norm for the short term at least. However, the fundamentals still look strong with gas inventories at a 5 year high for this time of year, suggesting the markets may well meander sideways again as we approach summer.
Upside:
Gas maintenance – BBL gas pipeline continues its planned maintenance until July 1st. Further unplanned outages could feed through to price rises.
LNG deliveries– LNG shipments continue to head towards Europe although at a slower rate
Downside:
Gas storage – Storage levels remain healthy for this time of year, sitting around 37% higher than this time last year, at 59% across Europe.
Wind/solar output – Expected to remain strong over the next fortnight.
Coal markets – Coal prices continue to fall due to healthy European stocks and concerns over deteriorating US-China relations.
Could go either way:
Brexit/Sterling – No change here, with little prospect of an agreement in the short-term this continues to be an area of significant risk. However, if we crash out expect Sterling to devalue and prices to rise in the short-term at least.
Carbon markets – Further price hikes are possible as the market awaits a key announcement from the European Commission.
Oil prices – Will oil markets recover from their recent slump? OPEC meet again at the end of June to discuss whether production cuts will be extended into the second half of 2019.
Non-energy costs: On the electricity side organisations will see further increases in pass through costs from both government and industry infrastructure providers in the coming months as distribution, Electricity Market Reform (EMR),Capacity Market and Energy Intensive Industries (EII) charges are ramped up.
Climate change levy (CCL) increased significantly from April 1st to offset the loss of CRC to Government revenues. Please see the attached pass through charge information for details. Your CCA related CCL exemption rates will increase at the same time (Gas 78%, Electricity 93%). Please ensure your PP11 forms are updated and sent through.
Warning: more gas suppliers are passing through backdated Un-identified Gas (UIG) charges for 2017/18. Please contact us if you have any questions or unusual gas bills.
Are you eligible for an EII rebate?
In August, the Government announced a consultation to extend the existing scheme which will be concluded shortly. Under current rules, if you qualify at an industry sector level and your business passes the 20% electricity intensity test you may qualify for exemption to CFD and RO charges. Please see the attached Government RO/CFD guidance document and give me a call to discuss this further. We will keep you updated with any confirmed changes to the scheme likely to feed through in the next month.
A copy of our detailed market report is available: Eneco Market Information early June 2019
Gas and electricity prices from 2009 to date are available here: Eneco Gas and Electricity Pricing Trends Sept 2009 to early June 2019
A copy of our environmental charges and Climate Change Levy rates from 2012 to date: Environmental Pass Through Charges and CCL ppkWh Updated 15.04.19
A copy of RO/CFD guidance document: RO_CFD_Guidance_Revised_July_2018
