E.ON has signed a gross bidding agreement with N2EX for its day ahead auction. The deal means E.ON is now trading in excess of 30% of its energy through the day ahead auction as well as a matching volume from its retail sales.
Following in the footsteps of SSE last year, E.ON believes the move to day-ahead trading will increase confidence in price and liquidity.
Dr. Tony Cocker, Chief Executive of E.ON UK said: “We want to see a credible and sustainable auction index that can be relied upon consistently- achieving this will give the confidence to new participants to take part in the auction and related over the counter contracts. A robust reference price is also an important building block to a successful implementation of electricity market reform in the UK.”
Jayesh Parmar, head of the Energy Advisory Service at Baringa Partners said the move would put pressure on other UK energy suppliers: “With the margins enjoyed by the UK’s major electricity suppliers coming under increasing scrutiny, these developments represent a significant shift towards improved price transparency in the marketplace.”
E.ON has decided to trade a higher percentage of its electricity generation on the day-ahead market than the 20% figure initially proposed by Ofgem. Mr Parmar added this could improve value: “We can expect to see substantially improved liquidity in the day-ahead auctions that, combined with much greater transparency in terms of price discovery, should remove some of the risk factors faced currently by new entrants.”