With the arrival of March, we reach the Final Countdown (a song by the appropriately named group ‘Europe’) to ‘Brexit’, how are the energy markets reacting and what does 2019 hold?
2019 has actually begun very favourably with Wholesale Energy prices dropping to a 6 month low, thanks mainly to a much milder winter (thus far) than in previous years, indeed this time last year the UK was in the grip of the ‘Beast from the East’ with National Grid warning of a potential shortage of supplies which very nearly led to the switching off of non-essential supplies!
MP’s continue to investigate whether the UK has sufficient stores of gas following the closure of the British Gas run rough gas storage facility (the UK’s largest single storage site of gas) in late 2017 and until the UK faces such demands as in early 2018, this cannot really be realised. However, on the 29th January the UK National Risk Assessment on Security of Gas Supply 2018 was published (a riveting read!) concluding that ‘the UK’s gas market is resilient to all but the most unlikely combination of high demand and supply disruption’ which has further helped stabilise the gas markets.
The Capacity Market (CM) scheme for ensuring power supplies during the winter months has been suspended following European Court of Justice (ECJ) ruling; The CM scheme subsidises owners of power stations to ensure available electricity for businesses and homes during peak periods in Winter. The cost of running and maintaining the CM is recouped (charged) via consumers electricity bills and currently accounts for approximately 2.9% of their invoice. The ECJ ruling renders CM unlawful for a period while the UK government seeks state aid approval from the European commission – but with Brexit rapidly approaching this may not be able to be secured at all. The suspension of the CM could lead to UK consumers being refunded for all payments already accounted for via their bills but this has yet to be stipulated and indeed if the refunds are made and the CM scheme is cancelled in its entirety, the Government will have to recoup the losses elsewhere which if history is anything to go by, will be offset against an increase to Wholesale electricity prices, further increasing costs to all businesses!
CM is just one of several newly introduced annually increasing non-commodity charges added to business energy bills that have been forecast to increase the price of electricity over the next decade by up to 65% versus todays costs!
The Government has concluded that it’s smart meter rollout deadline, aiming to ensure that all small and medium sized businesses are offered a smart meter by 2020, will once again not be met, with only 1 million of the anticipated 3 million smart meters having been installed in non-domestic premises to the 30th September 2018. Smart meters do have the ability to help small businesses save on their bills and as a result of another failed deadline the Government has launched further consultations on how this deadline could be achieved but with a shortage of meter installers and smart meters, who knows when the final meters will be installed!
If you would like any further advice or have any concerns on any of these points or if you have any energy or water related query then please do contact Fox Energy, the TSA’s Energy Alliance Partner on 01233 884510 or email [email protected].