Another Libor scandal?
Big fuel firms accused of gas price fixing
The big power companies have been accused of fixing gas prices. The claims have come in the week that customers of British Gas are facing bill hikes of 6 per cent.
The energy regulator Ofgem last night confirmed that it has been sent evidence about suspect trading. Meanwhile the City Watchdog the Financial Services Authority (FSA) said it has been contacted by a whistleblower with claims that the wholesale gas market has been regularly manipulated.
Energy Secretary Edward Davey has demanded an immediate investigation into the issue and is set to make a statement in the Commons on Tuesday afternoon. He said: “I am extremely concerned about these allegations and will be keeping in close touch with the regulators while they get to the bottom of this.”
ICIS Heron – which examines and publishes information about gas prices - confirmed that it has reported evidence of suspect trading on 28 September to Ofgem.
But a former worker at the firm has suggested that there have been several attempts to distort prices.
Seth Freedman told The Guardian newspaper that: “Traders have made it clear to me that manipulation is taking place on a regular basis.”
The Financial Services Authority confirmed that it has received information in relation to the physical gas market. It said: “We take market misconduct very seriously and will be analysing the material.”
Ofgem confirmed that it is looking into the issue and added: “In preparing for full implementation of new EU legislation to tackle market abuse (REMIT), we will consider carefully any evidence of market abuse that is brought to our attention as well as scope for action under all our other powers.”
The Department of Energy and Climate Change said: “The Government takes alleged abuse in our markets very seriously.
“The FSA and Ofgem have a range of powers available to them and have our full support in applying the law and ensuring that any wrongdoers are held to account.”
The department said the Energy Minister was told about the claims last Friday.
“We acted swiftly to tackle the attempted manipulation of LIBOR and EURIBOR and we are in the process of giving Ofgem more powers to tackle abuses, including the EU REMIT legislation,” a DECC spokesman added. “If further steps need to be taken, then that is what we will do.”
Last week Reuters reported an unnamed source who claimed that dealers sometimes take a loss by paying over the odds for gas in order to lift forward contracts – future prices - in which they may already have a larger position. Taking a small loss on the instant spot prices can lead to making a large profit on future.
The practice is particularly lucrative when trading is light and it is easier to move prices. The source said there may have been manipulative practices in the UK gas market across several weeks in August, a time when there were low gas trading volumes.
Last night the big six energy firms were keen to distance themselves from the price manipulation claims.
Centrica, which owns British Gas, said: Our compliance procedures and trading principles are clear. They require us to comply with all European Union and UK laws and we have done so.”
EDF Energy said it does not participate in loss-leading trading activity and considers it to be against existing market regulation. “We make information likely to impact market price formation publicly available on our website in compliance with the EU’s REMIT legislation," the company said.
E.ON said last week that it views loss-leading trading as illegal. A spokesman said: "In our view such trading behaviour is already against EU-regulations of REMIT and MAD, and regulatory procedures in Europe already cover such related trading operations or will do so in the near future."
SSE refused to comment when contacted by the Independent.
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