E.ON plans 1st German spot market for natural gas

Energy Trade

E.ON AG plans to set up a temporary market to encourage short-term trading of natural gas, creating the first spot market for the fuel in Germany, Europe's second-largest gas consumer. E.ON, whose Ruhrgas unit is Germany's biggest gas supplier, will guarantee the market daily trading of enough gas for delivery the next day to generate at least 4 million kilowatt hours, the Dusseldorf-based company said yesterday at a press conference in Essen. The market will trade gas in Germany's northern market, which gets supplies from Norway, Denmark, the Netherlands and Germany. German and European Union regulators are scrutinizing utilities and pushing for more short-term trading to improve competition in Germany's energy markets.

Aug. 30, the country's Federal Network Agency rejected estimates by E.ON and RWE AG, the country's two biggest utilities, of the cost of operating their power and gas grids, bringing pressure on them to cut prices. „We want to actively boost gas trading in Germany,” Jochen Weise, a member of E.ON Ruhrgas's board, said yesterday at the press conference. „Gas trading offers the prospect of achieving greater price transparency on the market and thus countering a key criticism directed against our industry.” Weise presented a model for an internet trading platform that E.ON would use to administer the choice market. Trading on the platform is scheduled to begin in October, depending on the response from gas traders, he said. E.ON will offer to buy or sell gas at a fixed time for a published, uniform price to facilitate trading, in a process known as a choice market. The market will also offer spot trading and deals by telephone for week-ahead and month-ahead gas supplies. Regional utilities and other traders will be able to buy the gas. They must provide for its transport themselves, Weise said. He said transport capacity is limited, and the company may work to increase it. E.ON expects to shut down its platform as soon as enough trading volume is present to support trading on other platforms. Weise said the company is in talks with European Energy Exchange AG and is willing to „actively support” gas trading at exchanges. (Bloomberg)

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