U.K. Regulators Probe Gas Market Fixing Allegations
The U.K. government is “extremely concerned” about allegations that the wholesale natural gas market has been manipulated by some of the nation’s biggest power companies, Energy Secretary Ed Davey said.
The Financial Services Authority notified the government Nov. 9 that it’s probing the allegations, the energy department said in a statement today.
The probe raise questions about how market prices are determined and whether companies that are involved in setting the prices may also profit by manipulating them. Davey said regulators will handle the investigation and his office won’t preempt their work.
“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,” Davey said in a statement released by his office in London today.
The Guardian reported today that a former trader who worked as a reporter gathering prices raised concerns after spotting irregularities on Sept. 28. It said the six biggest companies were among those attempting to raise or lower the gas prices and that the market’s key benchmarks are produced by one price- reporting company, making them unreliable and vulnerable to relationships between reporters and traders.
“At a time of economic uncertainty and rising global energy prices, British consumers deserve markets that are fair,” the energy department said in the statement. “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 allegations are similar to the recent Libor-rigging scandal. Barclays Plc agreed in June to pay a record 290 million-pound ($461 million) fine for manipulating the benchmark interest rate and several other banks have been investigated for colluding to set the Libor rate.
U.K. utilities said they comply with regulations. “EDF Energy does not participate in loss-leading trading activity and considers it to be against existing market regulation,” Electricite de France SA said in a statement. “We make information likely to impact market-price formation publicly available on our website in compliance with” European Union regulations.
“We are entirely confident that our energy portfolio management team operate in a fair and legitimate way,” a spokesman for SSE Plc (SSE) said in an e-mailed statement.
Officials at Centrica Plc (CNA), which owns British Gas, couldn’t immediately be reached for comment outside of office hours.
The price of next-day natural gas in the U.K. has risen 24 percent this year. It was little changed at 64.80 pence a therm today, according to broker data compiled by Bloomberg. Month- ahead gas climbed 0.3 percent to 66.22 pence a therm.
Centrica said last month it would push up gas prices paid by consumers about 6 percent starting Nov. 16. SSE raised them by 9 percent beginning in August.
“We can confirm that we have received information in relation to the physical gas market,” the Guardian cited the FSA as saying in a statement. “We take market misconduct seriously and will be analyzing the material.”
Officials at the FSA couldn’t immediately be reached. Davey plans to make a statement to Parliament about the matter tomorrow.
“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,” Davey said. “These powers will be in place ahead of schedule by the spring, making the U.K. one of the first countries to do this.”
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