City watchdog probes gas market

Nov 12 2012

The City watchdog has said it is investigating claims that the wholesale gas market has been manipulated by some energy firms.

The Financial Services Authority (FSA) 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. Mr Davey is expected to make a Commons statement on Tuesday 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."

The 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.

A Department of Energy and Climate Change spokesman said the Government takes alleged abuse in markets "very seriously".

He 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."