There were only 3 contracts traded that were eligible to include in the index calculations this month, following the trend in April of low volumes of trading. 

 

After a pause last month, the main index climbed again, to reach yet another record high. 

 

The FPVV index also climbed, but the CFD index really "shot up". However, there was only one eligible CFD and it is only for the middle two quarters of this year, so it has a very high price, which is not really representative of the market for longer term CFDs. 

 

Ideally, we would have an index for the next year, next two years, next three years, and so on, but there is not enough trading data to make this viable. Instead we use any contract with a term of six months or more; so during a month like May, when there is only one CFD and it is only for the next six months, with prices at 'eye-wateringly high levels', we can get large movements in one of the indexes, which will probably disappear next month (if there are more contracts traded). 

 

Over the last month or so, quite a bit has changed to reduce pressure on spot prices, although this hasn't really flowed through to the hedge market, at least not yet. For one thing, we've had some rain in the southern lakes, which is taking storage 'sideways', bringing it closer and closer to what we expect storage to be at this time of year: this happens because we expect storage to be falling steadily at this time of year. 

 

Genesis Energy also announced two new gas contracts, one of which is relatively large, to help it get through this and the next two winters, without burning as much coal at the Huntly power station as it has over the last few months.   

 

Norske Skog also announced that it is closing its paper mill at Kawerau at the end of this month. 

 

        

 

 

 

For a more in-depth view of the Monthly Electricity Contract Index Update, Issue 146 download the pdf below.