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As we firm up the level of the S-22 Price Cap, any unhedged customers will create significant losses
While customers continue to be individually protected by the Price Cap, the volatility in the wholesale markets means that any unhedged customers are likely to be loss making even at the projected ~£2,005 level of the Summer-22 Price Cap.
Price Cap level contracts are almost 100% underwater
Near term wholesale energy prices continue to increase across Europe, with significant increases in all along the forward curve.
The multi-billion cost of supplier failures
As price volatility continues and further supplier failures are expected, the energy industry is looking ahead to April with the hope that the market may start to resemble something a little more normal and the impact of this winter will ease. Whilst it may be some time before we have full certainty, some consequences are already known.
Henry Hub prices present material arbitrage opportunity in Europe
Bloomberg reporting this morning that 30 Tankers of LNG are en route from the US to Europe. The tankers contain a total of 4.9 million cubic meters of LNG, which if I've got my maths right is ~1bn therms / ~32TWh - valuing the cargo at more than £4bn.
European Gas Storage Levels At Risk Of Dropping to ~5% of Capacity By Late March
European Gas Storage Levels At Risk Of Dropping to ~5% of Capacity By Late March. Without from fundamental structural changes we are at real risk of gas scarcity across Europe by late March.
BFY In The News
From time to time, our team are asked to provide expert insights in the News and Press.
We can make £1b worth of energy efficiency savings, and help mitigate more supplier failures.
John Baldwin made a blindingly obvious, but superbly simple comment this week. We're in the middle of an energy crisis and yet there is deafening silence when it comes to energy efficiency advice and helping customers to use less energy.
December Mark to Market equals 8 years of Price Cap profits
At peak, the Mark to Market profit for *just* December was more than 8 years of profit allowed under the Price Cap.
European gas sites at less than 10% of required storage
Some European Gas Storage Sites Are At Less Than 10% Of Required Storage Volumes - Driving Price And Volatility
Potential £2billion impact on well run suppliers
The excess costs (ie losses) to hedge a typical switching sized customer at the price cap are approaching £1,000.
Challenges faced by energy suppliers are greater than the CMA claimed
“All they are actually doing – and I shall get into trouble for this – is metering and billing. They are not making the stuff,”. Words from the head of the CMA's two year investigation in the UK Energy Market according to the Guardian in 2016.
Price Cap predicted to be >£1,555
It's still very early to forecast, but our latest best view is that the April Price Cap will be in the region of £1,555 for a customer using 3,100 of Electricity and 12,000 for Gas.
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