Investigation into alleged manipulation of gas prices

BBC News, 12 November 2012

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The energy secretary said he could
closely follow the two investigations

Allegations of manipulation of UK wholesale gas prices are being investigated by the Financial Services Authority (FSA) and Ofgem.

The investigations by the FSA, the UK's financial watchdog, and energy regulator Ofgem follow claims by a whistleblower.

Energy Secretary Edward Davey said he was "extremely concerned about the allegations".

"The government takes alleged abuse in our markets very seriously," he added.

Three of the UK's big six energy suppliers have released statements to deny any involvement.

EDF Energy said it "does not participate in loss-leading trading activity and considers it to be against existing market regulation".

It added: "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."

NPower said: "There is an explicit commitment in our code of conduct to comply with all laws and regulations."

Scottish Power said that it had "never engaged in trying to fix wholesale gas trading markets", adding: "Our trading division always acts with integrity and follows all rules in all of its engagements with the market."

The wholesale gas price is the cost to the energy providers of the gas they buy from the wholesale gas market. This market includes everything from the UK's own North Sea gas supplies, to gas piped into the UK from continental Europe, and gas arriving in the UK by ship as liquefied natural gas.

The alleged manipulation is said to have lowered the wholesale price, and as such does not imply any knock-on impact on the retail price paid by customers.

'Considering evidence'

The Guardian newspaper, which received a separate tip-off from the whistleblower behind the allegations, said the investigations was into "some of the big six" energy providers, but the brief statements released by both Ofgem and the FSA do not name any companies.

The FSA said: "We can confirm that we have received information in relation to the physical gas market and will be analysing the information."

Ofgem also said it had "received information" and was looking into the issue. It added that it would "consider carefully any evidence of market abuse that is brought to our attention as well as scope for action under all our other powers".

Mr Davey said he would keep in close contact with the two investigations.

He will make a statement on the issue in the House of Commons on Tuesday.

The whistleblower, Seth Freedman, worked at ICIS Heron, a financial information company that publishes energy price reports.

ICIS Heron said it "detected some unusual trading activity on the British wholesale gas market on 28 September 2012, which it reported to energy regulator Ofgem in October".

It added: "The cause of the trading pattern, which involved a series of deals done below the prevailing market trend, has not yet been established.

"If anyone was to benefit from this it would have been derivatives traders."

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