Brexit, what happens to the energy market?
Every day we are now all too familiar with the words “deals” and “backstops” being mentioned with the Brexit media coverage regarding business preparation. As a business we are asking ourselves should we be doing something now?
Most of Great Britain’s energy market links with Europe are bundled up in the wholesale market. The Internal Energy Market which is Europe’s solution to harmonising the wholesale energy market was created during the last 5 years.
European Codes were introduced such as the Trans European Replacement Reserves Exchange (TERRE) and with it the Regulation on Wholesale Energy Market Integrity and Transparency (REMIT), which placed obligations on reporting changes in supply and demand patterns that may influence wholesale prices.
In these very uncertain times most of the communication from Ofgem has related to REMIT contingency arrangements in the event of a no-deal withdrawal.
In December 2018 Ofgem published a letter informing parties that it will continue to monitor and enforce the integrity and transparency of the wholesale market. Within 4 weeks of exit, all participants entering transacting trade orders will be required to register with Ofgem.
In addition, the Regulator has consulted with the industry throughout 2018, leading to its recent January consultation. This examined the consequential license modifications in the event that the UK leaves the EU without a deal. It is still the plan that the Withdrawal Agreement will be implemented (allowing for an orderly transition), and that the proposed changes will only be enacted in the event of a no deal.
It is highly likely that energy markets will experience anxiety and uncertainty and therefore volatility during this time of unchartered territory and usual market Trends would be likely to be eradicated by the uncertainty with increased costs incurred when signing a new contract.
Whilst the market is still stabilised pre Brexit we would strongly recommend having a review of your current contract to give you the ability to forward signing a new contract ahead of the predicted volatility forecast.
Whether your current contract is due in the next month or next year we can still forward purchase now on fixed contracted rates to start at that time, giving you the peace of mind in these uncertain times. Please contact one of our energy experts on 0115 8965460 who will be happy to help and guide you.