Energy companies could be fined if allegations of price fixing in the wholesale gas market are proved, says energy secretary Ed Davey, who also suggested that any reparations could also be passed on to consumers through lower bills.
“I see it as my job to protect consumers, not least the most vulnerable who can suffer the most when markets are abused.” he said in a statement to MPs yesterday. He also described the government’s ‘absolute determination to clamp down on any abuse that is uncovered’.
MP Greg Clark repeated the sentiment, saying that if prices were inflated, energy companies should be ‘severely punished’ and treated with the ‘utmost seriousness’.
The announcements come as more whistleblowers begin to come forward with claims that price rigging was common in the gas market, and could have spread to electricity market.
Seth Freedman, who first revealed the practice to the Guardian newspaper, will meet today with senior EU officials to further explain his allegations that gas prices were manipulated.
Both the FSA and the energy regulator, Ofgem have now launched investigations to try and find out whether energy companies were deliberately distorting energy prices to increase profits.
However all six suppliers have strongly denied any wrongdoing.
The allegations follow announcements from five of the six largest UK energy providers that they would be increasing their domestic energy prices, while energy supplier SSE posted half year profits which have risen by 38%.
There have been calls on the government to bring forward tighter regulation of the energy market, which has been accused of lacking transparency, especially around how they determine the price of residential energy.
Price rises and wholesale gas
The cost of wholesale gas makes up about 45%(?) of the average household bill, and is often cited as a reason for price rises.
For instance, announcing its price rise of 8.8% for gas and 9.1% for electricity, Paul Massara, chief commercial officer of npower, named ‘the price of gas for the coming winter’ as well as ‘new statutory schemes’ and ‘increases in distribution charges’ for the move, saying that they ‘are all being driven up by external factors, for example government policy’.
Meanwhile, EDF Energy said ‘the rising price of wholesale energy meant it could no longer put off a price change’ as they announced a 10.8% rise last month.
Talking about the allegations, director of consumer policy at uSwitch, Ann Robinson said the timing ‘could not be worse’ for consumers already struggling with high energy prices over winter.
“As winter makes its presence known, the cost of heating our homes will be taking its toll on cash-strapped consumers. With bills reaching an all-time high, it’s no surprise that almost nine in 10 households will be rationing their energy usage this winter.”
Gas prices manipulated, says whistleblower – Read about the allegations that energy suppliers may have manipulated wholesale prices.
Wholesale gas – Learn more about wholesale gas.