UK trading review proposals
The UK electricity regulator has published plans for an overhaul of the existing trading arrangements in the England and Wales electricity pool. The review contains a number of proposals for changing the present system which have been largely welcomed by the industry and consumers.
The proposals are designed to increase competition and make electricity pool trading more like trading in commodity markets. The review was prompted by concerns from consumers that the current arrangements give the large generators price-setting powers. Energy minister John Battle will now consider the proposals before taking action.
The new arrangements are likely to include a forwards and futures market, a short term bilateral market, a balancing market and a settlement process. Market participants would be required to make firm cash bids in advance for the majority of their power requirements.
The forwards and futures markets would operate up to several years ahead if required, and would evolve in response to demand. These would be operated by an independent market operator, and London`s International Petroleum Exchange has already said that it will bid to become the operator.
The short term bilateral market would operate from 24 hours to four hours before a trading period, and the balancing market from four hours before a trading period.