Energy row heats up

Marion Dakers
FRESH claims that traders fiddled the wholesale gas price surfaced yesterday as the government pledged to ensure the “full force of the law” is used on those found abusing the market.

Energy secretary Ed Davey yesterday stressed the coalition’s “absolute determination to clamp down on any abuse that is uncovered, wherever it might be and by whomsoever it might have been committed”.

The Financial Services Authority and energy watchdog Ofgem are probing allegations from a whistleblower that traders who submitted prices for the National Balancing Point (NBP) trading hub called in artificial values.

Price reporter Seth Freedman went public with claims that traders manipulated the market on 28 September, the year-end for the gas market and a key benchmark for future prices.

He said traders used the settling time of 4.30pm to their advantage, making unusually small bids at that time to influence the next day’s price.

“It’s a complete Wild West in the market for that period, especially the few seconds before [the assessment period expires at 4.30pm],” claimed one UK gas trader yesterday.

Another former trader at ICIS Heren, the reporting service that collates the price, told the Guardian yesterday that he thought the market was also being manipulated in 2011.

Because over-the-counter deals are between private parties rather than through an exchange, services such as ICIS set a benchmark value based on declarations from traders.

Concerns were raised last year about the regulation of the process, and the International Organisation of Securities Commissions and the EU are trying to tighten up the rules.

Consumer Focus said the wholesale gas price makes up around 50 per cent of the average household bill, though no evidence has emerged to suggest that the trades might have altered retail gas prices.

The big six UK energy firms, which are among the 50 or so participants in the NBP, have denied any involvement in suspicious trading.

The Office of Fair Trading “stands ready” to join the investigation if customers are found to have been affected, Davey told the House of Commons. The minister drew parallels with the Libor scandal, pointing to the coalition’s plans to crack down on benchmark-rigging since Martin Wheatley’s review into Libor.

Last night the spotlight also fell on the electricity market, with one former trader telling ITV News that price fixing occurred “among a small number of traders”.