Electricity prices in the UK and in Central Eastern European markets

UK wholesale electricity prices were also down year on year. In the period under review, the average spot price of a MWh of electricity was £ 38 (€ 43) for base-load power and £ 46 (€ 52) for peak-load power. These figures represent drops of 48 % and 49 %, respectively. The price curve also trended downwards in the UK electricity forward market. Contracts for delivery in the 2010 calendar year were settled for an average of £ 46 (€ 52) per MWh of base-load power in the first three quarters of 2009. This is 35 % less than the price of the 2009 forward in the same period last year. The price level for peak-load electricity dropped by 33 % to £ 56 (€ 63).

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

Development of wholesale electricity spot prices in the UK (line chart)

Development of one-year forward wholesale electricity prices in the UK £ / MWh

Development of one-year forward wholesale electricity prices in the UK (line chart)

RWE sells most of the production from its UK power stations forward, which is similar to the policy it pursues in Germany. However, absolute electricity prices are only of limited informational value as regards RWE npower’s earnings. This is because our UK generation portfolio largely consists of hard coal and gas-fired power plants, the costs of which are also subject to significant market fluctuations. RWE npower’s earnings development is therefore predominantly influenced by so-called “clean dark spreads” (hard coal) and “clean spark spreads” (gas). These are calculated by deducting the costs for the respective fuel and CO2 certificates from the market price of electricity. On average, the UK energy companies that sold their electricity generation for 2009 forward in the two preceding years realised clean dark and spark spreads that were lower than those for the corresponding forward sales of their 2008 production. Margins realisable from hard coal and gas-fired power stations of short-term spot market transactions also deteriorated. This is partially due to the cyclically-induced decline in demand for electricity, which primarily affected mid-merit and peak-load power plants. Another reason was the higher output from UK nuclear power stations, following several outages last year. Their rise in generation resulted in a drop of production, mainly from gas and hard coal power plants.

Most UK energy suppliers have lowered their tariffs in the end customer segment since the beginning of the year. However, electricity prices still reflect the significant increases implemented last year, which were necessary because most supply companies had purchased electricity in advance. Therefore, end customer prices in the first three quarters were up on the level observed in the same period last year, rising by 7 % for households and small commercial enterprises and by 26 % in the industrial and corporate customer segment.

End customer prices also advanced in most Central Eastern European electricity markets. Industrial enterprises in Poland and Slovakia paid 32 % and 20 % more, respectively. In Hungary, the price level for this customer group declined moderately. Private households in all the aforementioned markets saw their bills grow. The increase amounted to 16 % in Poland, 7 % in Hungary, and 3 % in Slovakia.