UK: Probe to examine gas price ‘abuse’
PUBLISHED: 09:09 13 November 2012
The City watchdog is today investigating claims that power companies are manipulating wholesale gas prices.
The Financial Services Authority (FSA) and energy regulator Ofgem said they are both looking into the claims.
Investigations have been launched after a whistleblower, named as Seth Freedman, claimed the gas market has been “regularly” manipulated by some of the big power companies, the Guardian reports.
Mr Freedman, who works as a price reporter for ICIS Heren, a company responsible for setting so-called benchmark prices, raised the alarm after identifying what he believed to be attempts to distort the prices reported by the company.
It was also reported that Ofgem has been warned by ICIS Heren that it has seen evidence of suspect trading on September 28, the date that marks the end of the gas financial year.
An FSA spokesman said: “We can confirm that we have received information in relation to the physical gas market and will be analysing that material.”
Ofgem, the energy regulator, said it had also received information relating to trading in the gas market.
Energy Secretary Ed Davey 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.”
It is understood the Treasury and the Department for Environment were alerted to the allegations - made by a whistleblower and reported by the Guardian newspaper - by Ofgem and the FSA yesterday. Mr Davey is expected to make a Commons statement on the matter this afternoon.
An Ofgem spokesman said: “In preparing for full implementation of new EU legislation to tackle market abuse, 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.
“Ofgem has already activated its established procedures to review the information we have received.”
ICIS said in a statement that it has “detected some unusual trading activity on the British wholesale gas market on September 28 2012”, which it reported to energy regulator Ofgem in October.
“The cause of the trading pattern, which involved a series of deals done below the prevailing market trend, has not yet been established,” an ICIS spokesman said.
“ICIS welcomes the seriousness with which the regulator has so far responded to this information and we have provided all the evidence at our disposal to help the regulator determine what happened.”
It is believed that on September 28 prices went down by about 0.4%.
ICIS also said that it welcomed the additional powers that are to be assigned to national energy regulators from next year under the REMIT regulation and the additional market oversight provided by the pan-European energy regulator ACER.
A Department of Energy and Climate Change spokesman said: “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.
“DECC officials and Secretary of State Ed Davey have been in close contact with the FSA and Ofgem since we became aware on Friday November 9.
“We stand ready to support their work and provide any assistance that we can.
“The Government has a strong record in providing the regulators with powers to regulate conduct in our markets. Where gaps in powers have been identified, action has been taken.
“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 (regulation on market manipulation and insider trading) legislation.
“These powers will be in place ahead of schedule by the spring, making the UK one of the first countries to do this.
“If further steps need to be taken, then that is what we will do.”
Shadow energy secretary Caroline Flint said: “These are very concerning reports which, if true, suggest shocking behaviour in the energy market that should be dealt with strongly.
“For months, Labour has said that customers are getting a raw deal and the gas and electricity companies should be forced to sell the energy they generate into a pool, to open up the market and ensure fairer consumer prices. These reports make the need for action all the more urgent.”
Many of the UK’s six energy companies spoke out about the allegations.
EDF Energy said: “EDF Energy 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 European Union’s Regulation on Energy Market Integrity and Transparency (REMIT).”
NPower said: “There is an explicit commitment in our code of conduct to comply with all laws and regulations.”
An SSE spokeswoman said: “We are entirely confident that our energy portfolio management team operate in a fair and legitimate way.”
A ScottishPower spokesman said: “ScottishPower has never engaged in trying to fix wholesale gas trading markets. Our trading division always acts with integrity and follows all rules in all of its engagements with the market.”
A British Gas spokesman last night denied that any manipulation had occurred.
“Our compliance procedures and trading principles are clear,” the spokesman said.
“They require us to comply with all European Union and UK laws and we have done so.”