A recent report compiled by Heren has shown that the amount of power trades has dropped by a third in comparison to the previous year. The cries of poor liquidity are definitely backed up by these results. Perhaps more worrying is the level in which predicted trades will reach for 2005 at approximately 1.5 times the size of the physical market. The Oil market has grown year on year in volume of trades and it is now trading at 9 times the physical market. Clearly, this is worrying for a market which has been around for nearly ten years and despite a trading overhaul with NETA it has regressed. Some of this regression must lie at the lack of a financial market, with most trades being physical. Many banks and fund managers are put off the idea of trading in a physical market because this inherrently makes them think that they have to know something about power stations and supply. In reality most get out of positions before they get delivered but even so, it is not a position that many wish to risk.

Moreover, most of the main incumbent players in the market are vertically integrated and so most of their trades are completed on internal traded volume. Perhaps what is worrying is that this volume is being accounted for with bid/offer models and not being fully tested in the market and this becomes increasingly more difficult to test when the market itself seems to get thinner and thinner. It is a sad indictment that the growth and strength of the power market is now in decline as a direct result of the NETA implications on utility long term strategy.