* UK day-ahead power contract plunges 69 percent
* Power prices normalise after Wednesday all-time high
Sept 15 (Reuters) - British wholesale gas prices rose early on Thursday while the day-ahead electricity contract sank from all-time high levels, down 69 percent as cooler weather forecasts reduce air conditioning demand.
Day-ahead electricity prices plunged to 48 pounds per megawatts hour (MWh) by 0750 GMT, compared with the previous day's high of 160 pounds per MWh.
"UK prompt power prices have retraced almost all of yesterday's bullish session, as temperatures are forecasts to return to seasonal norms over coming days, lowering demand for air conditioning and facilitating a much more balanced market," said Dorian Lucas, energy trader at Inenco.
Lucas said that electricity supply margins for Friday are expected to be around 2 gigawatts, an improvement from forecasts earlier this week that indicated negative margins.
The spike also highlighted concerns about available power generating capacity this winter, traditionally a peak period of demand, said Wayne Bryan, senior energy analyst at consultancy Alpha Energy.
In Wednesday trading, a batch of power generating outages affecting gas, nuclear and coal plants as well as low wind forecasts led to concerns about supply failing to meet demand in the last eight hours of Thursday, Bryan said.
The market is more relaxed about power prices for Friday delivery, traded through the day-ahead contract, which has declined to levels well below half of those seen on Wednesday.
In Britain's wholesale gas markets, the within-day gas contract rose 4 percent to 21.75 pence per therm, while the day-ahead contract was up 2.35 percent at 21.80 pence per therm.
The gas market was less oversupplied than it had been in recent days, showing a supply overhang of 11 million cubic metres/day on Thursday, compared with well over four times that earlier this week, according to National Grid (LSE: NG.L - news) data.
Gas prices further out on the curve edged higher in line with Brent crude oil prices.
The Winter 16 contract rose 0.20 pence to 38.20 p/therm.
In the Netherlands, the day-ahead gas price at the TTF hub was up 0.17 euro at 11.10 euros per megawatt-hour.