'Big companies' named in gas price fixing investigation

Nov 13, 2012

Allegations of market manipulation follow recent price rises for consumers

UK REGULATORS are investigating an alleged attempt to manipulate prices in the wholesale gas market similar to the Libor interest rate fixing scandal in the banking sector earlier this year, The Guardian reports.

The Financial Services Authority (FSA) and Ofgem are examining unusual price activity in late September in the National Balancing Point (NBP), a virtual hub that serves as the main pricing point for natural gas. The regulators were tipped off by a whistleblower, Seth Freedman, who claimed gas prices were being regularly manipulated.

The question the FSA and Ofgem must address is whether market traders submitted quotes below the market price in order to force the NBP to fall and subsequently profit from the lower price position in other markets.

Freedman, a former City trader who worked as a price reporter at ICIS Heren for nine months, told the Guardian: "They name big companies among those they accuse of trying to rig prices and reap profits," he said. "Market participants claim the fixing of prices is an open secret."

Energy Secretary Ed Davey said he was "extremely concerned" about the allegations of manipulation and the government was keeping in touch with the investigation. He was expected to make a statement in the House of Commons later today.

The allegations come at an awkward time for the gas industry - with five of the big six UK energy companies recently announcing price rises, and blaming the rising wholesale gas price.

As the Financial Times reports, they also come just days after US regulators said they were seeking a record fine of $435m against Barclays Bank for manipulating electricity prices in California between 2006 and 2008.

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