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| Ofgem widens investigation into alleged rigging of gas and power markets | Ofgem widens investigation into alleged rigging of gas and power markets |
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| The energy watchdog, Ofgem, has widened its investigation into alleged manipulation of gas and power markets and warned that doubts over price-setting could lead to higher household bills. | The energy watchdog, Ofgem, has widened its investigation into alleged manipulation of gas and power markets and warned that doubts over price-setting could lead to higher household bills. |
| Announcing the expansion of an inquiry that started in November following whistleblower revelations published in the Guardian, Ofgem questioned whether the agencies that report gas and power prices, which help determine the cost of energy trades, were "fit for purpose". | Announcing the expansion of an inquiry that started in November following whistleblower revelations published in the Guardian, Ofgem questioned whether the agencies that report gas and power prices, which help determine the cost of energy trades, were "fit for purpose". |
| It said that "a lack of confidence in the integrity of benchmarks may raise prices to consumers as the costs of risk from uncertainty may be passed through to them". The watchdog warned of "more significant regulatory intervention" if self-regulation failed to answer its concerns. | It said that "a lack of confidence in the integrity of benchmarks may raise prices to consumers as the costs of risk from uncertainty may be passed through to them". The watchdog warned of "more significant regulatory intervention" if self-regulation failed to answer its concerns. |
| The move follows dawn raids on one price reporting agency (PRA) and three oil companies by the European commission two weeks ago and allegations six months ago by a whistleblower of potential price fixing in the UK day-ahead gas market, used by big energy firms. Action by the energy regulator in London also comes 24 hours after it emerged the European commission plans to beef up control over oil and gas benchmarks. | The move follows dawn raids on one price reporting agency (PRA) and three oil companies by the European commission two weeks ago and allegations six months ago by a whistleblower of potential price fixing in the UK day-ahead gas market, used by big energy firms. Action by the energy regulator in London also comes 24 hours after it emerged the European commission plans to beef up control over oil and gas benchmarks. |
| Ofgem, along with the City regulator, the Financial Conduct Authority, is already undertaking specific investigations into possible gas price manipulation raised by Seth Freedman, a whistleblower from the ICIS-Heren PRA. Sources close to the investigations say this work is intensifying, with preliminary findings expected later in the summer. A further source said Thursday's announcement represented a new "stream" in the ICIS-Heren investigation. | Ofgem, along with the City regulator, the Financial Conduct Authority, is already undertaking specific investigations into possible gas price manipulation raised by Seth Freedman, a whistleblower from the ICIS-Heren PRA. Sources close to the investigations say this work is intensifying, with preliminary findings expected later in the summer. A further source said Thursday's announcement represented a new "stream" in the ICIS-Heren investigation. |
| Freedman, a former City trader, raised concerns about the accuracy of benchmarks – or price estimates – produced by price reporting agencies. He was subsequently sacked by ICIS. | Freedman, a former City trader, raised concerns about the accuracy of benchmarks – or price estimates – produced by price reporting agencies. He was subsequently sacked by ICIS. |
| Ofgem said it was aware that some believed tougher regulation could discourage energy companies from co-operating with PRAs and further undermine the pricing system. Centrica, the owner of British Gas, plus Statoil, one of the three oil companies along with BP and Shell, being looked at by the commission, have already ceased co-operating with PRAs. | Ofgem said it was aware that some believed tougher regulation could discourage energy companies from co-operating with PRAs and further undermine the pricing system. Centrica, the owner of British Gas, plus Statoil, one of the three oil companies along with BP and Shell, being looked at by the commission, have already ceased co-operating with PRAs. |
| The action came as the government produced new laws giving Ofgem powers to impose unlimited fines on anyone guilty of rigging commodity trades. Under the REMIT regulations laid before parliament Ofgem will be given extensive new powers. | The action came as the government produced new laws giving Ofgem powers to impose unlimited fines on anyone guilty of rigging commodity trades. Under the REMIT regulations laid before parliament Ofgem will be given extensive new powers. |
| Ed Davey, the energy and climate change secretary, said: "It is vital that we have all weapons at our disposal in the fight against unlawful activity in the energy market. It is my role to protect consumers, particularly the most vulnerable, who can suffer the most when markets are abused. That's why I have given Ofgem new powers to deal with market manipulation and insider dealing in wholesale gas and electricity. These include unlimited fines and new access to information, including the power to enter premises." | Ed Davey, the energy and climate change secretary, said: "It is vital that we have all weapons at our disposal in the fight against unlawful activity in the energy market. It is my role to protect consumers, particularly the most vulnerable, who can suffer the most when markets are abused. That's why I have given Ofgem new powers to deal with market manipulation and insider dealing in wholesale gas and electricity. These include unlimited fines and new access to information, including the power to enter premises." |
| Andrew Wright, Ofgem's senior partner for markets, said it was vital consumers had confidence that energy markets were transparent and free from manipulation. "These powers complement the work we are doing to improve liquidity and transparency in energy markets, and our broader reforms to improve consumer trust and confidence." | Andrew Wright, Ofgem's senior partner for markets, said it was vital consumers had confidence that energy markets were transparent and free from manipulation. "These powers complement the work we are doing to improve liquidity and transparency in energy markets, and our broader reforms to improve consumer trust and confidence." |
| Concerns about the price reporting agencies and the oil markets were raised in a report published last year by the International Organisation of Securities Commissions (IOSCO), an association of organisations that regulate the world's securities and futures markets. | Concerns about the price reporting agencies and the oil markets were raised in a report published last year by the International Organisation of Securities Commissions (IOSCO), an association of organisations that regulate the world's securities and futures markets. |
| Before Christmas, the French oil group Total said in an explosive letter to IOSCO: "Sometimes the criteria imposed by PRAs do not assure an accurate representation of the market and consequently deform the real price levels paid at every level of the price chain, including by the consumer." | Before Christmas, the French oil group Total said in an explosive letter to IOSCO: "Sometimes the criteria imposed by PRAs do not assure an accurate representation of the market and consequently deform the real price levels paid at every level of the price chain, including by the consumer." |
| Historically, big gas price contracts – such as ones to import gas from Russia to Britain – were linked to the price of oil, but this has changed in recent years, making gas prices reported by PRAs much more important. | Historically, big gas price contracts – such as ones to import gas from Russia to Britain – were linked to the price of oil, but this has changed in recent years, making gas prices reported by PRAs much more important. |
| The UK government has been slow to introduce REMIT. Angela Knight, the chief executive of Energy UK, a lobby group that speaks on behalf of the Big Six power companies and others, said she did not think market manipulation was a "widespread problem" in Britain. While it was right that regulators should have powers to enforce penalties, she insisted these should be "proportionate". | The UK government has been slow to introduce REMIT. Angela Knight, the chief executive of Energy UK, a lobby group that speaks on behalf of the Big Six power companies and others, said she did not think market manipulation was a "widespread problem" in Britain. While it was right that regulators should have powers to enforce penalties, she insisted these should be "proportionate". |
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