Market specialists at Icis said that wholesale power prices have hit their lowest level since 2011, encouraged by a global glut in the amount of available gas supply which has resulted in a return of strong LNG imports to the UK system.
Since 2011 global LNG producers have favoured the price premium in the Asian gas markets. But as Asian prices fall due to low demand and plummeting oil prices the UK has fast become an increasingly attractive destination for cargoes.
“This means that, for the likes of Centrica and Eon, both of which have flexible supply contracts with Qatar, the UK could prove a more attractive LNG import option through 2015 and 2016, or at least a more viable market of last resort than has been the case in previous years,” said Icis head of gas Ben Wetherall.
The number of LNG cargoes coming in to the UK was three times higher over the past three months than seen in Q1 2014, which has caused wholesale gas prices in the UK to fall to 30 per cent below where it was last year.
In turn, Icis says the wholesale electricity price has followed suit, which could ease the cost burden on UK utilities as they come under increasing political pressure to behave competitively as the Compeititon and Markets Authority investigation continues.
Icis head of electricity Zoe Double said the price of long-term power in the first quarter of the year was already 10 per cent lower than in Q4 2014.
“In terms of retail bills, wholesale prices only make up around half of the total bill for consumers, but lower energy costs would encourage suppliers to make sure they are competitive,” Double said.