The report suggests that UK utilities will remain under pressure to raise gas and power prices throughout the remainder of 2006 and parts of 2007 with gas prices facing considerably greater pressure, reflecting the fact that the biggest utilities have considerably stronger structural positions in power than in gas.
Lead energy analyst at Datamonitor Andrew Hill explains: “Utilities with lower wholesale market exposures are more able to absorb rising wholesale prices and thus delay or even prevent switching-inducing and brand-damaging retail price rises.” To this end a number of utilities have sought to reduce their gas market exposures, Hill says. However, despite progress made by some, gas prices are likely to remain high during the rest of 2006 and parts of 2007 given the currently precarious supply-demand balance in the UK.
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