UK power traders slam Ofgem Christmas and New Year market-making scheme

British energy regulator Ofgem is set to face an angry backlash from the UK power market – after revealing it plans to enforce its two daily, mandatory market-making windows on both Christmas Eve and New Year’s Eve.

The regulator, which imposed the windows on the Big Six utilities earlier this year in a bid to artificially resuscitate dwindling liquidity on the forward curve, told ICIS late on Friday it will challenge traders to prove why they should not be sat at their desks between 15:30-16:30 – the latter of the two windows – on the days in question:

“As far as we are concerned, Christmas Eve and New Year’s Eve are business days, so unless the obligated parties can come up with a convincing reason why they should not be regarded as business days, they will have to trade on those days,” a spokesman said.

But the somewhat combative statement is guaranteed to raise blood pressure in the market, with many traders seeing it as one intervention too far, and one that is wholly unnecessary.

A source close to the matter said: “It is not sensible. It creates a lot of work for people and it is not necessary”.

Another source told ICIS it would be “ridiculous” if the windows were imposed.

On Christmas Eve and New Year’s Eve, the market historically ceases trading at 12.00, well before the second market-making window opens. According to trade data reported to ICIS the last trade on the UK power market on New Year’s Eve 2013 was at 11:49, and on Christmas Eve the latest time of trade was 11:16. And this pattern has been broadly the same for a number of years, with the market’s closing time recognised across the entire UK energy complex as 12:00.

This puts the UK power market in line with the British NBP gas hub, which closes at midday on those days, and to which it is intrinsically and fundamentally linked.

Allowing these two markets to trade unfettered and in tandem – which is largely what the costly and market-led transition from EFA to Gregorian calendars last year was in aid of – is widely seen as one of the most effective means of boosting UK power liquidity.

The earlier market-making window opens at 10.30 ( see EDEM 26 March 2014 ). Abigail Beall