London (Platts)--11Dec2012/844 am EST/1344 GMT

Prompt power prices continued to climb higher Tuesday morning as extremely cold weather sets in across the UK and wind generation levels remain subdued, market sources said.

On the OTC market day-ahead baseload was last heard 65 pence higher on day at GBP54.65/MWh while peakload power surged over GBP2 higher to GBP63.05/MWh with support from a "very strong auction result", a trader said.

The N2EX day-ahead baseload power auction outturned at GBP55.34/MWh, from Monday's GBP53.26/MWh result.

Peak daily power demand is expected to surge over 3% higher than Tuesday's 55.75 GW to 57.7 GW Wednesday as temperatures plunge below the seasonal norms.

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The Met Office issued an "amber" warning Monday ahead of the cold snap which will be particularly felt in the densely populated southeast of England. London temperatures will fall between 3 and minus 3 degrees Celsius Wednesday which is 5 degrees below the seasonal norm, CustomWeather data shows.

In addition to strong than usual seasonal demand the colder weather has increased power prices across Continental Europe, capping imports into the UK at zero by midday Tuesday.

Wind generation levels remain negligible at below 200 MW midday and is forecast to remain below 500 MW over much of Wednesday, adding further buoyancy to the prompt.

Although EDF Energy returned its 480 MW Hinkley Point B-7 nuclear reactor to service late Monday night following a 10-week statutory outage nuclear generation remains below the 8 GW mark following Friday's unplanned outage at the 660 MW Heysham 2-7.

But as power prices continue higher, an oversupply of gas has weighed day-ahead gas prices resulting in increasingly favorable spark spreads, market sources said.

As a result gas-fired generation has increased its share of the energy mix to 17.6 GW (or 34.7% of the energy mix) while coal-fired power holds it dominant position at 23.4 GW (or 46.2%).

However, the cold snap is expected to be short-lived with temperatures forecast to flip to levels above the seasonal norm by the weekend, CustomWeather data shows.

Weekend baseload prices opened around 60 pence lower than Monday's close at GBP48.25/MWh and softened further over the morning to GBP47.75/MWh by midday, traders said.

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