Ed Davey has promised “firm action” against any individuals or companies found to have manipulated wholesale gas prices in the UK.
The Energy Secretary was addressing parliament this afternoon after it emerged yesterday that regulators Ofgem and the Financial Services Authority are investigating claims by a City whistleblower of price fixing in Britain’s gas market.
The whistleblower, Seth Freedman, maintains that some of Britain’s big power companies have been distorting wholesale prices given to them by price reporting companies. These prices are used as the basis for wholesale gas contracts, so small changes in prices can cost or save companies millions of pounds.
The allegations come at a critical time for Britain’s energy sector, with power companies fending off accusations of profiteering and the government in the final stages of preparing its Energy Bill. Parts of the coalition government are understood to favour gas over renewables as a medium-term solution to cap rising household energy bills, while opinion is divided over whether the forthcoming bill should set a target for decarbonising the UK's power grid.
Addressing the House of Commons, Davey said market abuse was “always wrong” and acknowledged the likely public backlash should the claims prove correct. “At a time when people are companies are struggling with high energy bills, the country would expect us to take firm action if these allegations prove true, and we will,” he said.
He said the claims would be taken “very seriously”. “We will support the regulators taking whatever steps necessary to ensure that the full force of the law is applied, if they are true, so that any guilty parties are held to account,” he said.
Davey said the investigation was at an “early stage”, but promised to “clamp down” on any wrongdoers.
Responding to the claims, Angela Knight, Chief Executive of Energy UK, which represents Britain’s power companies, said: “This is a very serious issue which must be investigated swiftly. The gas market is an international one with many overseas companies trading on it as well as organisations that are not energy companies.
“Our members will all cooperate fully with the regulators and