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UK power price index hits lowest ever point

The power price index produced by market specialists at Icis has hit its lowest ever level, as bearish gas prices continue to drive down the cost of generation.

The Icis Power Index (IPI) is now at a 16 per cent discount to value this time last year, having closed at a fresh low of £44.565/MWh on Thursday, 15 January.

The index launched last year but calculates forward power prices from 2011, which have all exceeded Thursday’s close.

“Longer term, the index was down 20 per cent since mid-2011, underlining how far wholesale electricity prices have fallen over the last three years,” said Icis’ power editor Jamie Stewart.

The losses followed steadily falling UK wholesale gas prices. According to Icis the price of gas for this winter has fallen 29 per cent from the beginning of last year.

Icis gas editor Ben Wetherall said weaker gas price levels look set to continue over the next 2-3 years.

“The current UK wholesale gas price for delivery in 2016 and 2017 is only marginally higher than prices for delivery between now and April. Notwithstanding any global price shocks, in any competitive market like the UK there should be more downward pressure on the wholesale price component of energy bills through 2015,” he said.

However, he added that the lower cost of wholesale gas might not translate into lower consumer bills, as called for by both Labour leader Ed Miliband and chancellor George Osborne.

“The wholesale price remains the largest component of a standard household gas bill, but non-energy related factors such as transportation and green costs are an increasing part of the overall bill,” he said.