Introducing ICIS data used in the price cap€¦ · Introducing ICIS data used in the price cap Zoe...
Transcript of Introducing ICIS data used in the price cap€¦ · Introducing ICIS data used in the price cap Zoe...
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Introducing ICIS data used in the price cap
Zoe Double
Head of Power
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ICIS’ role in the energy markets
ICIS’ data used in price cap calculations
Putting ICIS’ methodology into practice
Agenda
Disclaimer: ICIS accepts no liability for commercial decisions based on the content of this presentation
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Who we are
ICIS provides market intelligence services to the global petrochemicals, energy and fertilizer markets. We are part of the Data Services division of Reed Business Information (RBI).
RBI is a leading business to business information publisher. The other major data services include Bankers Accuity and Flight Global. Other key divisions within RBI focus upon marketing solutions and leading magazine brands. RBI is part of Reed Elsevier.
Reed Elsevier is one of the world’s largest professional information companies, employing over 35,000 people in 200 locations worldwide, with annual revenues of just over £6 billion in 2011. It is a leading provider of professional information and online workflow solutions in science and medical (Elsevier Science), legal, risk information and analytics (LexisNexis), and business sectors (RBI and Reed Exhibitions, the world’s largest exhibition organiser).
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ICIS’ role in the energy markets
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Best known for being the most widely used reference for spot gas prices in Europe
The world’s longest price history database for European gas and power markets and global LNG trade – 20+ years of UK gas and power references
The largest specialised gas, LNG and power reporting teams
ICIS data is the benchmark for UK and European energy market information
Ofgem’s Supplier Cost Indicators use ICIS data
UK Competition and Markets Authority energy investigation used ICIS data
ICIS Power Index launched 2014, historical data from 2007 – aimed at consumer/media audience to help transparency
ICIS sponsored and coordinated Parliamentary Working Group on the UK gas market
ICIS in Energy
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To provide independent market price references and encourage market transparency
Price reporters take information from the whole market
The major price reporting agencies have been designing methodologies and monitoring markets for decades, with an open and consultative process to manage change
The value of independent price reporting organisations:
Neutral – without a trading position, price reporting agencies are trusted by both buyer or seller.
Independent – not actively trading in the market, so free to talk to a wide range of market participants to find the best price (and using journalistic skills to assess the information we’re given).
Transparent – we show the market the data we use, and our methodology (how we reach our prices) is public.
ICIS’ role within the energy markets
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ICIS’ data used in price cap calculations
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The Competition and Markets Authority (CMA) imposed a prepayment charge restriction as part of its Energy Market Investigation
The price cap applies from 1 April 2017 to 31 December 2020
The level is updated every six months on 1 April and 1 October, with Ofgem calculations based on costs faced by suppliers
Wholesale energy costs are calculated from ICIS data – Q+1 to Q+6 for gas; season+1 to season+3 for electricity
Wholesale prices take into account a six-month observation period, a two-month time lag, and 12-month delivery period. So for 1 April 2017 update, price cap energy costs would be calculated based on the average for annual delivery from 1 August 2016 to 31 January 2017.
All data is available from https://www.gov.uk/cma-cases/energy-market-investigation
Competition and Markets Authority price cap
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ICIS’ market valuations
Blue dots represent actual trades
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ICIS’ market valuations
Price assessments
The value of a commodity at a designated point in time.
Uses multiple sources of information, including bids and offers, trades, and spread data.
Indices
A calculated price based on a volume-weighted average of transactions.
Uses deals only.
Includes deals done over a specific time period – 15 minutes to 1 month.
Blue dots represent actual trades
All day volume weighted
index 72.382
Closing assessment
72.5
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Price assessments in detail
ICIS gives priority to the highest bid and the lowest offer at the close 16:30 London time close for UK gas and power markets
Priority order of data for assessment:
bid-offer spread – highest bid and lowest offer
trade
spread trades (geographic or commodity)
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Sources of data
We collect information as widely as possible from active participants in the markets.
Sources must be active market participants –verified by a supply licence or are registered to trade at a relevant venue.
Market information is corroborated by reporters, using their market knowledge and analytical skills to source and cross-check data.
So what do we see?
Sets of market deals from many participants –cross-checked and de-duplicated by ICIS’ data team
Deals transmitted direct from Trayport Trading Gateway by companies signed up to the service
Companies send screen prints from Trayport and broker screens throughout the day
Companies send closing bid/offer spreads from front and back office
Companies talk to reporters via phone and IM throughout the day to give price information and help us cross-check and explain what we’ve seen
Reporters use supply and demand data from TSOs and others to cross-check reasons for price moves.
More active participant market sources are welcome
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Price assessment transparency
Key codes show the primary source of data used, and give subscribers clarity on how ICIS reached its decision
B – Bid/offer
T – Transaction
S – Spread – ie, spreads to another market at closing time, or moving a contract in line with another day on day (from market info that day).
F – Fundamentals
I – Interpolation/extrapolation – eg, matching component contracts.
Indicative pricing – fewer than three sources, or only wide spreads available.
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Additional considerations
16:30 market close for gas and power allows for margin calculation and accurate hedging
Strong liquidity on the gas market for market close at 16:30
Market close is in line with the second UK power trading window mandated by Ofgem’s‘Secure and Promote’ licence condition launched in 2014
ICIS confirms, validates and publishes individual trades – allows index validation, but also allows detailed analysis of liquidity trends and developments
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Why ICIS price references are trusted
ICIS policies and processes comply with the IOSCO Principles for Oil Price Reporting Agencies
The Principles were initially designed for oil markets but at IOSCO’s suggestion all major PRAs have committed to comply with them across all commodities.
ICIS had its fourth successful external audit on compliance with these principles in September 2016 for European gas, crude oil, European fertilisers and a wide range of global petrochemicals.
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Putting ICIS’ methodology into practice
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UK power – bids and offers reported 19 January 2017
UK power 19/01/2017
Reporter Henry Evans
XXX 13:08 XXX 15:56 XXX 16:18 XXX 16:25 XXX 16:29 XXX 16:30 XXX 17:05
Baseload Bid Offer Bid Offer Bid Offer Bid Offer Bid Offer Bid Offer Closing midpoint
February '17 53.25 54 53.3 53.9 53.26 53.41 53.2 53.41 53.16 53.4 53.2
March '17 51.24 51.5 51.15 51.3 51.2 51.3 51.1 51.25 51.12
April '17 49.4 49.75 49.3 49.45 49.3 49.45 49.34
May '17 45.97
Q2 '17 46.9 46.68 46.86 46.55 46.65 46.55 46.6 46.5 46.72 46.64
Q3 '17 44.14 44.67 44.33
Q4 '17 47.58
Q1 '18 49.72
Summer '17 45.5 45.85 45.6 45.8 45.39 45.6 45.4 45.6 45.4 45.6 45.38 45.6 45.48
Winter '17 48.75 49 48.75 48.98 48.65 48.8 48.65 48.8 48.65 48.8 48.64
Summer '18 41.09 41.33 40.8 41 40.82 41 40.81 41.02 40.8 41.02 40.87
Winter '18 36 39.25 44.83 45.09 44.62 44.87 44.7 44.87 44.66 44.87 44.79
Summer '19 39 42 37 39.25 38 38.75 38 38.75 36.99 38.75 38.58
Winter '19 39 42 40 41.75 40 41.75 41.04
Summer '20 43.79
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Highest bid and lowest offer at 16:30 market close:
Summer ‘17
16:25 – bid at £45.40/MWh, offer at £45.60/MWh
16:29 – bid at £45.40/MWh, offer at £45.60/MWh
16:30 – bid at £45.38/MWh, offer at £45.60/MWh
Winter ‘17
16:25 – bid at £48.65/MWh, offer at £48.80/MWh
16:29 – bid at £48.65/MWh, offer at £48.80/MWh
16:30 – bid at £48.65/MWh, offer at £48.80/MWh
What other supporting evidence do we have?
Initial evidence
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Trade source example
DateTime DealID Aggressor Action Price Volume Product Contract
19/01/2017 10:38 5E+06 Sell 49.02 10 UK Baseload Winter 17
19/01/2017 10:38 4E+06 Sell 49.01 10 UK Baseload Winter 17
19/01/2017 10:38 5E+06 Sell 48.97 10 UK Baseload Winter 17
19/01/2017 10:40 5E+06 Sell 49.05 10 UK Baseload Winter 17
19/01/2017 10:40 5E+06 Sell 49.09 15 UK Baseload Winter 17
19/01/2017 10:51 4E+06 Sell 46 5 UK Baseload Summer 17
19/01/2017 10:53 4E+06 Sell 45.9 5 UK Baseload Summer 17
19/01/2017 10:53 5E+06 Sell 48.95 5 UK Baseload Winter 17
19/01/2017 10:53 5E+06 Sell 48.95 5 UK Baseload Winter 17
19/01/2017 11:01 5E+06 Sell 48.91 10 UK Baseload Winter 17
19/01/2017 11:38 4E+06 Sell 48.85 5 UK Baseload Winter 17
19/01/2017 13:54 4E+06 Sell 45.5 5 UK Baseload Summer 17
19/01/2017 15:30 5E+06 Sell 48.76 10 UK Baseload Winter 17
19/01/2017 16:13 5E+06 Sell 48.7 10 UK Baseload Winter 17
19/01/2017 16:27 5E+06 Sell 48.62 10 UK Baseload Winter 17
19/01/2017 16:27 5E+06 Sell 48.65 10 UK Baseload Winter 17
19/01/2017 16:28 5E+06 Sell 48.65 3 UK Baseload Winter 17
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All notes, pricing sheets, trades (in raw form) archived
All calls/IMs/emails completed and attempted are logged
Checklists completed after every assessment
Weekly spot checks by Editor
Editor’s check then overseen by Managing Editor
Compliance – checklists and data retention
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All our price assessments are accompanied by market commentary:
The reasons for market moves
Additional data and information to support pricing.
News coverage includes:
Daily news stories – original or adding additional information
Market analysis – trends in prices and liquidity
Focus – more in-depth commentary on key issues
New media, including podcasts, webinars and infographics
We specialise in market information, including news and commentary
Two-thirds of ICIS’ power and gas news is original and not found anywhere else (2016 figures)
Price trends explanation and analysis
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Questions?
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Please visit our website at www.icis.com
Our daily market reports covering UK energy:
European Spot Gas Markets
European Daily Electricity Markets
Methodologies available from:
https://www.icis.com/compliance/
To arrange a trial, please contact [email protected] call +44 207 911 1919
To find out more