Several U.K. power trading shops, including Innogy, Accord Energy and Entergy-Koch Trading, and broker Spectron, are looking to forge an electricity swaps market. John Evans, director of business development at Spectron in London, said it has met many of the leading energy trading firms recently to agree standardized rules and indices.
The U.K. power swaps market flourished under the old electricity pool purchasing market, but since the launch of the New Electricity Trading Arrangement in 2001, it has dried up. "There have been some options traded, but the market has become almost exclusively physical," said Evans.
The entrance of banks and other financial institutions into the power market is making it more important than ever to create a liquid financially settled forward power market. Spectron is suggesting using its indices based on day-ahead and month-ahead power prices. The contracts would be based upon existing International Swaps and Derivatives Association documentation.
