Traders in general like rules. These rules are used to put trades on in the market. The advantage of rules are that they state that all markets have a form of order, and that when there is chaos, order will eventually return. One of the great rules traders have always used is the relationship between peaks and baseload.

If we consider that peaks are a part of the baseload make up then we know that if we take price out of the equation for a normal month 36% of baseload is taken up by peaks. Adding price back into the equation we start to guage how the market is responding to different fundamentals. For example, emissions prices in general have increased the price of nights, and this in turn has brought the peaks and baseload ratio down. When we look at the Summer 06 peak and baseload ratio we can see it is at 1.2, we would therefore expect that ratio to remain throughout the individual months. Interestingly summer months are trading very flat (by this we mean that the differential between April and June is very small, in fact May June July and August are all trading in a £1 range of each other) this in turn suggests that the peaks will be very flat and in order to comply with the Summer 06 ratio will all be trading at between £50-£54/MWh. In contrast the day ahead peaks are trading at £51 and it is due to 8 degrees with lashing rain across the majority of the country. In short for the ratio to remain (the traders rule) the peaks look overvalued in the constituent months