Gas price goes negative but stays high for winter:
Consumers can be forgiven for being confused about energy prices. Yesterday gas prices in a part of the UK wholesale market albeit briefly turned negative. Britain had too much gas. Companies were paying someone else to take their gas away. This doesn't mean the gas bill is about to plummet, not yet anyway. Prices in the wholesale gas market for the months of December, January and February are still running at about 70p a therm double the level of two years ago. These prices are the ones that have most influence over what we pay when we turn on the heating. What happened yesterday was restricted to intra-day prices gas bought for immediately delivery in the highly specialised on-the-day commodity market. The OCM is a market mechanism designed to keep daily supply and demand roughly in balance. Pushing too much or too little gas into the system is not a good idea. Yesterday the market ran into two exceptional factors: mild weather which meant demand was lower than expected and the flow of gas from a new pipeline bringing gas from Norway which is in the process of commissioning. The market was suddenly "long" on gas. The upshot yesterday morning was prices running at negative levels - at one point the price of gas was minus 4.5p a therm. National Grid, which has the job of keeping the system in balance, charges companies for putting more gas into the network than contracted for. One explanation put forward for the negative prices was that some players were prepared to pay for their "excess" gas to be taken away rather than face so-called "cash out" penalties from National Grid. By lunchtime the OCM gas price had turned positive again but yesterday's events in one corner of the market will encourage those who believe the new gas import infrastructure projects coming on stream will eventually put downward pressure on prices - and customers could end up with lower energy bills. 4.10.06