The market today opened with a bit of a flurry a few Winter 06's trading at £59.00 and also some Winter 07 activity which traded up at £57.80. This perhaps supports the theory that the Winter 06 prices are unlikely to get much lower. Emissions prices for 2008 onwards can be seen as the main differential between years and there is no doubt that Winter 07 looks cheap given where we have seen prices go for Winter a year out. Given this it is even more interesting that the market is pricing in new build, a reduction in gas costs and emissions costs by 2010 as there is a £7-8 differential, with Winter 10 threatening to break £50.

Experience suggests that the market undervalues potential for things to go wrong and the differential looks very large given so many unknowns.