Monthly Wholesale Price Brief - A Review of European Gas and Power Price Trends: December 2006

Introduction
The growing role of wholesale traded energy markets across Europe creates a greater need for players throughout the value chain to be aware of the latest market movements and developments. From the wellhead or power station gate to the end-user, volatility in the spot and forward price of power and gas is creating an increasingly challenging environment for all market participants.

Scope
An examination of the wholesale gas price trends in Europe's three key markets - the UK NBP, the Zeebrugge Hub and the Dutch TTF.
An assessment of traded peak and baseload power prices in the EU's three key electricity markets - the UK, Germany and France.
Key analysis of cross-border price differentials and commodity spreads relating to current issues that are driving European energy debate.
A comprehensive graphical breakdown of wholesale, retail and liquidity trends in Europe's most influential energy sectors.
Highlights
The German power curve is most susceptible to carbon price volatility in NW Europe. From the beginning of 2008 the German power curve becomes consistently more expensive than its French counterpart. This reflects the greater exposure faced by fossil-fuel fired German power generators in a higher carbon price climate.

French Virtual Power Plant (VPP) are failing to inspire an upturn wholesale trading activity. The dominance of EDF continues to curtail trading activity in France's wholesale power market. EDF still runs voluntary VPP auctions in order to facilitate Third Party Access to its vast nuclear fleet, however, the volumes involved remain small.

Moderate Irish tariff decreases are a sensible strategy in an uncertain gas price climate. Given the uncertainty surrounding supply-demand fundamentals for the coming peak demand period, the CER's decision to cut gas tariffs by 10% appears prudent. A stronger regulated tariff cut may ultimately require a re-assessment in the short-term.

Reasons to Purchase
Establish the current level of wholesale and retail energy prices and the fundamental drivers behind movements in the traded value of gas and power.
Understand how wholesale pricing impacts different facets of the value chain, identifying the potential to limit risk through hedging strategies.
Forecast future developments in the traded price of gas and power in order to successfully take advantage of arbitrage opportunities.