London energy brokers launch UK power price indices

LONDON July 30, 2003 - Five London energy brokers on Thursday will jointly launch a stable of price indices for the UK power market in a move designed to boost liquidity, the broking industry's association said on Wednesday.

The indices will be based on weighted averages of day ahead baseload trades handled by the brokers involved, said the London Energy Brokers Association (LEBA) in a statement.

"LEBA is committed to providing data which accurately reflects market activity in the physically traded UK OTC electricity markets," said LEBA chairman Michael Beales.

"LEBA believes that the new indices will be beneficial to trading institutions and facilitate the trading and hedging of the principal underlying commodity," he added.

Indices are benchmarks used by traders to settle physical commodity deals and financial contracts such as swaps, which are popular with the banks that are starting to trade power.

The brokers behind the new indices are GFInet UK Ltd, Prebon Marshall Yamane (UK) Ltd; ICAP Energy Ltd; Spectron Futures Ltd and The Link Asset and Securities Company Ltd.

The indices, which will compete with existing benchmarks such as those offered by UK power bourse UKPX will be published by financial information provider Moneyline Telerate, said LEBA.

The move comes as the UK power market steps up its search for a price benchmark acceptable to all traders.

The Power Trading Forum (PTF), an industry group, has set up a sub-committee to concentrate on identifying a suitable index and is setting out its requirements to index providers such as publishers and exchanges.

Dealers are reluctant to use existing indices because they doubt their ability to reflect prices accurately enough, and because of concerns about how well they could be audited.

Power benchmarks are under scrutiny from regulators in the wake of the Enron scandal after some U.S. utilities admitted misleading reporters who compile them.

Reuters