Carbon Floor Tax in U.K. May Push up 2013 Gas, Power Price, Evolution Says

U.K. natural gas and power prices may increase because of the British carbon floor tax, according to Evolution Securities.

Gas prices in 2013 may rise by about 4 pence a therm and power by 4.70 pounds per megawatt hour, Lakis Athanasiou, a U.K. utilities analyst at Evolution Securities in London, said today in an e-mailed note.

Negative market reaction yesterday in Drax Group Plc (DRX)’s share price was “wrong-headed,” he said. “The additional CO2 price is being set three years in advance so that generators will have time to include this rise in hedging activities, minimizing basis risk. To the extent gas and coal generators are unhedged for 2013/14, the impact of higher CO2 prices is neutral.” Drax owns western Europe’s largest power station.

To contact the reporter on this story: Catherine Airlie in London at cairlie@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.