ENERGY firms found guilty of manipulating the markets could face criminal prosecution, according to new government reforms proposed by Ed Davey yesterday.
In his annual statement, the energy secretary also confirmed plans for a yearly competition review “to make sure the energy market is operating properly” and said he wanted to make it easier for consumers to switch suppliers, ideally in 24 hours rather than the current five weeks.
As regulation currently stands, under the new UK Cartel Offence, individuals who have engaged in a price-fixing cartel could go to jail – but only if the regulator can prove that they were working together.
Meanwhile EU civil legislation permits Ofgem to launch an investigation into suspected energy market manipulation and impose fines on the companies involved, but does not extend to criminal sanctions.
“Ed Davey is proposing criminal powers for energy market manipulation, which are likely to be similar to those put in place as a result of the Libor investigation,” said Dan Burton, senior associate at Freshfields Bruckhaus Deringer. “If introduced, Davey is correct that this would be the first time that there have been criminal sanctions for individuals for market manipulation of energy pricing.”
Despite the proposed criminal powers, some critics have argued that the statement has not added much on to existing plans. “The energy regulator Ofgem has already introduced an annual review so I don’t know how different this one will be,” Mulu Sun, utilities analyst at Liberum Capital told City A.M. “There are attention-grabbing headlines, but there are not many new things in the statement.”
The statement notably does not mention “rolling back” green levies on consumers’ bills, which Prime Minister David Cameron proposed last week. A 10 Downing Street spokesperson told City A.M. that the proposals are still going ahead but that work on them is ongoing and will be announced in the autumn statement in December.