On July 26, Powerisk wrote a news article showing that in time the spread between Septemeber and Novemeber would narrow, then it was £15.50/MWh differential and today it is nearer £13/MWh and narrowing. The front months have fallen, and there is no doubt that the fundamentals of the market show that at the point of delivery there appears to be no carbon, fuel or supply problems. In fact the main reason for recent rises has been the fear of the unknown. This risk of the unknown means that large players banks, suppliers are buying carefully and pricing in risk into the underlying. A fully developed market would have built in optionality and traders would gear their positions to reflect how volatile the market with options. Sadly the options market has failed as the valuations have broken down and over the last two years traders have tended to undervalue them, causing those to be short to lose alot of money. This has meant that volatility is being priced into long term curves. This is not always a good thing and if it remains players will eventually stop buying on a forward basis. In the meantime, the nearer a major product (Winter 05) reaches delivery, the less the forward buying and risk premia is applied, hence the breakdown in the months.