13 November 2012

FSA and Ofgem investigate price fixing allegations in wholesale Gas market

Does the alleged price fixing on the wholesale gas market really affect the consumer? As the one's putting money into the system, yes it does. What can you do?

Gas price reporting agency ICIS Heren noticed suspicious transactions on the 28th September but didn't investigate fully before publishing their price for the "Day Ahead” contracts. The date is a significant one in the wholesale Gas market as many long term contracts refer to that particular price. The price is set by sampling actual prices from trades around 4.30pm. On the 28th, there were half a dozen trades of low volumes at least 0.5p per therm lower than the average price for the day.

Whistleblower Seth Freedman who worked as a price reporter at price reporting agency ICI Heren said he believed this was not a one-off incident saying to the Guardian:

"Traders have made clear to me that manipulation of gas prices is taking place on a regular basis. They name big companies among those they accuse of trying to rig prices and reap profits. Market participants claim the fixing of prices is an open secret.”

The suspicious trades on the 28th were actually forcing the wholesale price down not up but the implication is that someone is making money somewhere. That money has to come from somewhere and the only ones putting money into the system are the consumers.

The big six energy companies have all issued statements denying any wrongdoing on their part and that they're all complying with all EU and UK laws etc.

Adam Scorer, Director of Policy and Externals Affairs at Consumer Focus, responding to the allegations said:

"Reports that traders have routinely manipulated the wholesale gas market must be immediately and vigorously investigated.

"That investigation must establish whether such manipulation has taken place, whether it was a single incident, whether, as reported, this is ‘taking place on a regular basis' and which individuals and companies may have been responsible. If such an investigation exposes a culture of manipulation then the structure and operation of the market is in question, not just the behaviour of rogue traders.

"The wholesale gas price makes up around 50% of the average consumer bill. The movement of those gas prices has explained years of rising household and business energy costs.

Whether increased scrutiny and regulation will eventually result in lower prices for consumers is anyone's guess. In the meantime, the best way to make the market work is to review your energy costs and ensure you get the best energy deal available to you now. Even better, switch through us by the 30th November and we'll give you £20 cashback – for details click here.