Energy news in general

QrizB

The end of the week.

Gas has had a few ups and downs this week but futures for June have closed at 131p a therm. That's roughly 0.5p/kWh lower than the price used when setting the April cap.

The next 12 months aren't looking quite so good - max of 254p for Feb 23 - but there's plenaty of time for them to change yet, up or down.

tlcgrantham

QrizB said:

The end of the week.

Gas has had a few ups and downs this week but futures for June have closed at 131p a therm. That's roughly 0.5p/kWh lower than the price used when setting the April cap.

The next 12 months aren't looking quite so good - max of 254p for Feb 23 - but there's plenaty of time for them to change yet, up or down.

Many thanks for your insightful posts but could you please the explain how does the 0.5pkwh lower fit in with Gas Tracker today being almost 2.5pkwh lower than the April cap? Surely the futures for June is more than 0.5pkwh lower than the April cap. 

QrizB

tlcgrantham said:

QrizB said:

The end of the week.

Gas has had a few ups and downs this week but futures for June have closed at 131p a therm. That's roughly 0.5p/kWh lower than the price used when setting the April cap.

The next 12 months aren't looking quite so good - max of 254p for Feb 23 - but there's plenaty of time for them to change yet, up or down.

Many thanks for your insightful posts but could you please the explain how does the 0.5pkwh lower fit in with Gas Tracker today being almost 2.5pkwh lower than the April cap? Surely the futures for June is more than 0.5pkwh lower than the April cap

The various prices - the ICE futures, Ofgem's price-cap value and Tracker - are only indirectly related to one another. However, here are the calculations.

A therm is 29.3kWh.

• The April cap was based on an average wholesale gas price over the previous Aug-Jan of 4.9p/kWh,144p/therm.
• Today's closing price for June futures of 131p/therm is 4.47p/kWh.
• The day-ahead price used for Tracker today was 3.3p/kWh, 97p/therm.

So today's Tracker wholesale price was about 1.2p/kWh less than the closing June futures and 1.6p/kWh less than the average price Ofgem used when setting the current cap.

The formula Octopus use when calculating the retail price of Tracker appears to give a lower unit price than Ofgem's calculations for the cap did. Check out prices for 27/09/21 (Tracker price close to current cap, wholesale ~5.5p) and 10/09/21 (wholesale ~4.9p, retail 6.7p).

bristolleedsfan

Same narrative as when was just original Big 6, when wholesale prices increase quick to put up prices,  when wholesale prices fall. already bought ahead at higher price.
https://www.bbc.co.uk/news/business-61373482

Warning to Ofgem

Scottish Power is also concerned that energy companies will sustain further big losses if Ofgem sets the new energy price cap - due to take effect in October - too low.

Wholesale gas prices have fallen sharply since the all time records set in March.

However, many energy companies bought the gas they will supply this winter at prices much higher than current levels.

If Ofgem does not recognise this when it sets the new cap, some firms will have to sell at a significant loss threatening them with further distress or collapse which would further destabilise the market, according to Scottish Power.

QrizB

bristolleedsfan said:

Same narrative as when was just original Big 6, when wholesale prices increase quick to put up prices,  when wholesale prices fall. already bought ahead at higher price.
https://www.bbc.co.uk/news/business-61373482

Ofgem have already announced changes to take account of this.

tghe-retford

Other things to take away from that article is the prediction of a £2,500 to £3,000 cap. They also want energy bills to increase to pay for targeted help. Help which will go toward pensioners and benefit claimants but not those on low wages whose pay has been frozen or even cut. And disturbingly of all, if they don't get their way of either the abolition of the cap or at least a high, profitable price cap, energy companies exiting the UK market, leaving millions of households in limbo.

Sounds like threats. Do as we say so we can make massive profits or we put millions of households in peril.

Alnat1

If Scottish Power have already bought their gas now for next winter, does that mean they also paid for last winters gas the previous year, before prices rocketed? 

savers_united

They can keep their threats, if they bought energy in advance then they should have been fine last winter, we were all paying a 12% increase to the cap and they were using gas that was bought at lower prices earlier in the year, swings and roundabouts.

The Gov't need to be strong on this and threaten to nationalise the lot if the energy companies want to play hard ball. 

See the price on tracker is below 3p for Gas today... 

Uxb1

you have forgotten that to buy your energy for a fixed sum in advance costs money.
You are paying someone to take on the risk of the prices rising so you are protected.  In some way its just like buying an insurance policy. - except in reverse.
If the market soars in price you are winning, but if the market tanks then you are in a mess as you have now committed yourself to buying the energy at a higher price while your competitions who did not forward buy can buy it cheaper, sell it cheaper and then steal your customers with cheaper prices.
So SP would have had to pay a premium over whatever was the current wholesale price at the time when the forward pricing contract was fixed.

savers_united

They all follow the same pattern, petrol prices the same, quick to rise them but alot slower to bring them back down. Then one breaks rank and lowers the price and they all follow. 

It will be interesting to see when they do start to set their variable rates below the max set by Ofgem. There will come a point where they wil be buying forward contracts below what the Ofgem calculation on the cap is.