The latest allegations that gas prices have been manipulated by energy companies reveal the “potential dangers” of letting the Big Six control so much of the energy market.
It has surfaced that a whistleblower reported to regulators a series of “unusual” deals below the market price on 28th September earlier this year. Ofgem and the Financial Services Authority are looking into the matter.
Analysts believe this means we need “much firmer” regulation.
Gary Hornby, at Inenco said: “Irrespective of whether the FSA and Ofgem find any evidence of wrongdoing, you are talking about a tradable commodity at the end of the day, so there is always going to be a danger of people trying to manipulate prices unless there is sufficient regulation in place.
“I think these allegations about wholesale prices, especially in the wake of the Libor scandal, highlight that tighter monitoring and much firmer regulation is required.”
Consumer groups echoed the demand for a “vigorous” look at whether this is a single incident or if traders have routinely manipulated the wholesale gas market to make a profit.
Adam Scorer, Director of Policy and External Affairs at Consumer Focus said: “If such an investigation exposes a culture of manipulation then the structure and operation of the market is in question, not just the behaviour of rogue traders.”
With half the average consumer bill made up of wholesale gas price, people will question whether they are being charged a fair price, he suggested: “Consumers have little confidence that the balance between wholesale energy costs, domestic prices and company profits is fair.
“This will be the trigger to get into the guts of the wholesale gas market and its relationship to domestic prices and establish whether consumers can have confidence in the price they are being asked to pay and the increases they are expected to bear.”