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Power Prices to Rise in Europe as Fuel Costs Surge

(Bloomberg) — Electricity rates are set to rise in Europe, boosting utility sales and punishing consumers, to keep pace with rising coal and natural gas costs used to fire power plants.

German prices for 2009 delivery will probably climb 13 percent this year to 82 euros ($127) per megawatt hour, said UBS AG analyst Per Lekander. They rose 12 percent last year.

Coal has more than doubled in a year to $167 a ton from South Africa and natural gas in Britain almost tripled. Record energy costs have led industrial customers including Wal-Mart Stores Inc., the world’s biggest retailer, and Dutch airport operator Schiphol Group NV to seek to trade electricity directly on commodity exchanges to save money.

“European power is still cheap with current fuel prices,” Daniel Dahlin, chief investment officer at hedge fund manager Electris Asset Management Ltd., said in an interview from Stockholm. “The trend is pointing up.”


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