Electricity prices in the UK and in Central Eastern European markets

UK wholesale electricity prices were also markedly up year on year. In 2008, a megawatt hour of base-load Glossary power sold for an average of £71 (€89) on the spot market. This is more than double the figure for 2007, which was £29 (€43). Peak-load Glossary power increased in price from £39 (€57) to £91 (€114). Electricity prices were significantly higher than those in Germany because in the UK, gas-fired power plants, which typically have high variable costs, account for a larger share of generation capacity, and therefore have a stronger influence on the formation of electricity prices. Prices on the UK electricity forward market Glossary climbed as well. In 2008, the contract for the 2009 calendar year traded at an average of £68 (€85) per MWh of base-load power. This is 66 % more than the cost of the 2008 forward a year earlier. The peak-load forward price advanced by 58 % to £82 (€101).

RWE sells forward most of its UK production, similar to the policy it pursues in Germany. Prices realized for generation sold by RWE npower in 2008 are therefore determined by the wholesale market’s development in preceding years. However, the level of electricity prices realized is of limited value in assessing its earnings. This is because our UK generation portfolio differs from our German one in that the former largely consists of hard coal and gas power stations, the fuel costs of which are exposed to substantial market fluctuations. The clean dark spreads and the clean spark spreads commented on earlier in this report are the main determinant of RWE npower’s earnings trend.

Development of wholesale electricity spot prices in the UK in £/MWh

Electricity tariffs in the UK end-customer business rose to a much lesser extent than spot prices on the wholesale market. Electricity purchases by industrial and commercial customers were an average of 20 % more expensive than in 2007. The price increase in the household and small commercial enterprise segment was 17 %.

The price of electricity rose on our markets in Central Eastern Europe as well. Households in Slovakia were charged 3 % more year on year. Electricity bills for this customer group in Poland and Hungary were up more, rising by 14 % and 19 %, respectively. In some instances price increases for industrial enterprises were higher still, amounting to 10 % in Slovakia, 21 % in Hungary and 23 % in Poland.