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Investigation launched into `fixed' gas prices

John Fitzsimons
by Lovemoney Staff John Fitzsimons on 13 November 2012  |  Comments 11 comments

Claims that wholesale gas prices have been subject to manipulation under investigation by the FSA and Ofgem.

Investigation launched into `fixed' gas prices

Ofgem and the Financial Services Authority (FSA), the energy and finance regulators respectively, have launched an investigation into claims that wholesale gas prices are being manipulated.

A former trader turned whistleblower yesterday came forward with claims that the market has been subject to tampering in much the same way as the inter-bank lending rate Libor. To find out more about the Libor scandal, read Four thoughts about the Libor scandal.

The allegations

The whistleblower has been named as Seth Freedman, who worked as a price reporter at ICIS Heren, a company responsible for setting benchmark prices. He told the Guardian newspaper that traders had made clear to him that the manipulation of gas prices was taking place “on a regular basis”. And it’s the big names in the energy market who are alleged to be taking part.

He also claimed that price reporters were put under pressure by traders to change the prices they reported, while the information provided to reporters to help them establish prices is far from clear.

ICIS Heron has separately approached Ofgem with claims that it had seen evidence of suspect trading.

The claims have been denied by most of the ‘big six’ energy providers.

Why it matters

Wholesale gas prices are what energy firms pay for the fuel they buy, and subsequently provide to us. As a result they have a significant impact on the price we pay for our energy.

Energy firms have long been criticised for ramping up their bills when wholesale prices rise, but failing to cut prices when wholesale costs fall. If the markets have been subjected to this sort of manipulation, it may mean that we are all paying more for our energy than we should be.

What’s more, most of the big energy providers have already announced prices rises for this winter, which they have blamed on wholesale gas prices.

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Comments (11)

  • LiamT
    Love rating 45
    LiamT said

    i bet even if they are found guilty we wont see any of that cash back. if found guilty they need to be heavily fined and the fines go back to the users.

    Report on 13 November 2012  |  Love thisLove  2 loves
  • russbiker
    Love rating 70
    russbiker said

    Another day, another allegation of corporate malfeasance.

    We're led, served and controlled by donkeys!

    Report on 13 November 2012  |  Love thisLove  0 loves
  • LiamT
    Love rating 45
    LiamT said

    wonder how many tory lovers will be in here moaning. energy supply should be state controlled to stop this. and the tories want to do this to the NHS too...

    Report on 13 November 2012  |  Love thisLove  1 love
  • GaryDean
    Love rating 76
    GaryDean said

    It must take a lot of courage & some extremely sound info to blow the whistle. However I very much doubt we'll see any severe penalties being handed out. It'll blow over as it always has & always will. If we steal from them we go to prison. If they steal from us, on what is a far grander scale, there may be a few resignations with massive payouts as a reward. The government will make a lot of noise, the opposition will grab the opportune moment but we will continue to be ripped off. The bottom line is money. Those in power are slaves to it just as most of us are & ultimately they will not wish to do anything that will impede their future prospects or present careers.

    Report on 13 November 2012  |  Love thisLove  2 loves
  • Megatyte
    Love rating 23
    Megatyte said

    I wouldn't hold your breath waiting for Ofgem to do anything about it. They're supposed to be looking after the consumers interests but they're funded by the power companies.

    How can that work when they're in the pockets of the industry that they're supposed to police?

    A H

    Report on 13 November 2012  |  Love thisLove  1 love
  • CuNNaXXa
    Love rating 410
    CuNNaXXa said

    Ironic that BG stated recently that their profit margin, after the accountants had played with the figures, was a measly 5%. If that is based on manipulating wholesale prices, then we might actually be looking at double figures in reality.

    I am sure that the stockholders who are seeing minimal returns for their investment will question these figures for themselves.

    In the mean time, if OfGem and Trading Standards penalise the gas companies for their irresponsible trading regime, I am sure that they will compensate themselves by putting up prices, and getting us to pay their fines for them.

    It happens in ALL businesses. If they make a loss, they pass that loss on to their customers. Pilfer something from Tescos and they will reflect that loss in their pricing strategy. In fact, the only group who cannot pass on a loss is the consumer.

    The buck stops at the consumer.

    Report on 13 November 2012  |  Love thisLove  0 loves
  • sludgeguts
    Love rating 56
    sludgeguts said

    I find it laughable that the government is investigating gas suppliers for fixing prices whilst they are more than happy to manipulate prices at the forecourts and take the best part of 80% of the price of a litre of fuel.

    Talk about double standards.

    Report on 13 November 2012  |  Love thisLove  1 love
  • LiamT
    Love rating 45
    LiamT said

    sludgeguts - taxing the poor. blame the muppets who voted blue last election. it was always going to happen.

    they need to be careful else we might revolt like half of europe today.

    Report on 14 November 2012  |  Love thisLove  0 loves
  • CuNNaXXa
    Love rating 410
    CuNNaXXa said

    @ LiamT.

    Forget about those who voted Blue, count everyone who voted.

    Basically, when we vote, we are just voting on how we will get screwed. Each successive government, regardless of what colour, serves its own purpose, not ours.

    Being an MP is just the start of the Gravy Train. While the basic pittance of a salary is a measly £60,000, they can boost their earnings by claiming for everything from watching pr0n to renting their homes to other MPs and claiming rent back from renting from other MPs.

    In fact, if an accountant can make money disappear, an MP can make money re-appear in their own personal bank account.

    Talk about corrupt...

    Report on 14 November 2012  |  Love thisLove  1 love
  • LiamT
    Love rating 45
    LiamT said

    CuNNaXXa - i was referring to the tories selling off our public infrastructure to companies that want to make a profit from us. which they seem to be doing nicely dont they?

    i agree it would be nice to have some power over these self serving morons. since they forget they work for us!

    Report on 15 November 2012  |  Love thisLove  1 love
  • ronat42
    Love rating 71
    ronat42 said

    LiamT. I agree with your comments about the 'self serving' politicians (I think the word politicians covers the description adequately and 'morons' is a bit limited in it's scope) and that the sale of the utilities doesn't seem such a good idea now. It did go a long way to paying off our national debt before Labour took over and raised more cash by selling off our gold reserves and then squandered the lot and a lot more before leaving us with the biggest growing national debt of all time. OK, 'squandered' is a bit harsh but it has left us with a more expensive public service sector and a lot of promises which the country cannot afford. We are in a ship which is almost fatally holed below the water line and trying to break the habit of drilling more holes in the misguided hope of letting the water out.

    The Tories have known this for some time and Labour are now reluctantly jumping on the bandwagon.

    As far as the general theme of the discussion is concerned we have a choice of bloated inefficient state management or private ownership which is accountable to it's shareholders. Originally the plan was that the shareholders would be the customers but we now have companies which are foreign owned by large multinationals and losing more daily. Perhaps this is one of the holes which should be given urgent attention so that efforts can be applied to rebuilding the economy to stop the country spending more than it earns and cut the tax revenues which are also leaking badly as a result.

    Report on 16 November 2012  |  Love thisLove  0 loves

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