Energy firms have 'rigged the market'

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The man who'll dig up the power industry

Power companies have deliberately manipulated Neta, the new electricity trading market, to keep wholesale prices high, the Government's energy regulator has warned.

Ofgem chief executive Callum McCarthy said that since the trading exchange was set up in March, he suspected that companies had knowingly abused the market. "There have been some instances where prices have unusually changed, which looks very hard to justify in normal market conditions," he said. His comments come as the Department of Trade & Industry is due to decide whether to give Ofgem full powers to investigate such abuses.

While price-fixing is harder on Neta than it was under the old electricity "pool", Mr McCarthy said companies could still withhold generating capacity to influence prices.

"[Without the DTI powers] the market will be more open to manipulation, and quite simply electricity prices will be higher. Ofgem has an obligation to protect the interests of consumers," he said.

Ofgem lost is powers to investigate suspected price-fixing – known as "market abuse clauses" – last year after British Energy and AES challenged the regulator. The Competition Commission ruled that there was no need for the clauses. Mr McCarthy has since applied to the DTI to have the powers reinstated, though in a different form.

If the DTI backs Ofgem, it is likely to spark an outcry. Trade body the Electricity Association said in a letter to the DTI that it was "strongly opposed" to Ofgem's proposals and that new abuse clauses would deter new generators from entering the market.