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.

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