January Energy Market Update

Market News

Gas and power markets continued to show a downward trend through December, with gas prices hitting multi-year lows as we entered the holiday period. Strong LNG arrivals, robust Norwegian flows, and mild weather kept the supply and demand picture comfortable. However, late December saw colder conditions and Norwegian outages which has added mild upward pressure. Despite this, major price spikes were avoided due to the healthy LNG deliveries reducing supply concerns.

Key Market Drivers

Key market driver	What happened	Price influence
Geopolitical tensions	Ukraine Conflict: ceasefire talks progressed but remained unresolved; risk premiums eased early in the month, but uncertainty persists	Down
	Potential US intervention in Iran and other countries adds further geopolitical risk	Up
Global supply/demand	LNG imports were seasonally strong, though weekly fluctuations	Down
	Weak Asian LNG demand continued to divert cargos to Europe, supporting supply confidence	Down
	US pricing and soft Chinese economic data reduced competition for LNG	Down
	Norwegian pipeline flows remained strong overall, despite brief outages	Down
Weather-Related Demand Volatility	Persistent mild conditions dominated most of December (3–8°C above norms), reducing heating demand	Down
	Colder temperatures at the end of the month and into January have increased volatility and short-term price risk	Up
EU Gas Storage	EU storage levels stayed adequate but ~9–10% below last year, posing risk if late-winter demand spikes	Up
EU-UK carbon market linkage	UK carbon prices hit 30-month highs due to auction pauses and expectations of UK–EU ETS linkage	Up
Non-commodity costs	Ofgem approved £28bn for network upgrades in December to be funded through increased charges to consumers	Up
	Revised transmission charge forecasts published in late December show ~60% increase down from +100% increases forecasted in August. (Appendix 1)	Up
	Non-commodity costs are expected to make up ~70% of electricity bills as we go into the 2030s	Up

Outlook

Wholesale Gas and power prices are expected to remain broadly stable amid strong LNG supply and weak Asian demand capping major upside risk, though colder-than-normal conditions in January could introduce short-term price pressures. UK carbon prices are likely to stay supported due to auction pause and ETS linkage expectations.

The current lower wholesale prices offer business an opportunity to review their current energy contracts and take advantage of these low commodity rates, and potentially offset the projected rises announced for the non commodity standing charge elements within invoices, which are set to drive costs higher.

Appendix 1

Forecasts for the Transmission Network Charging element within energy contracts (TNUoS) were published by the network operator in December. The change from April next year shows an average rise of over 60% for most users. These charges are set to continue to rise throughout the 5-year charging period. The 2026 tariff rates will be finalised at the end of January.

Forecast yearly cost per meter type

Transmission costs - Residual Fixed Charges Forecast Apr 26 year on year movements

Band		2025/26	2026/27	2025-26% change
Domestic	Tariff - £ / Site / Year	£49	£82	66%
LV_NoMIC_1		£57	£88	56%
LV_NoMIC_2		£134	£216	62%
LV_NoMIC_3		£278	£457	65%
LV_NoMIC_4		£755	£1,273	69%
LV1		£1,426	£2,132	49%
LV2		£2,383	£4,234	78%
LV3		£3,742	£5,289	41%
LV4		£8,300	£14,042	62%
HV1		£7,968	£11,710	47%
HV2		£22,922	£43,086	88%
HV3		£44,455	£68,193	53%
HV4		£115,923	£194,522	68%
EHV1		£58,679	£119,703	104%
EHV2		£270,758	£426,394	57%
EHV3		£575,325	£924,197	61%
EHV4		£1,417,199	£2,095,734	48%