UK extends regulator's powers amid price fixing probe
The UK government has widened the powers of its power market regulator following the energy price fixing probe
The UK's Department of Energy and Climate Change (DECC) said the Office of Gas and Electricity Markets (Ofgem), the country's electricity and gas market regulator, will receive new powers to tackle energy market abuse.
These will include new powers to request access to energy price information, to inspect premises of trading companies and price reporting agencies. DECC said Ofgem would also be able to impose unlimited fines on any organisations found to break the law.
DECC said the Electricity and Gas Market Integrity and Transparency Enforcement Regulations will come into force from the 29th June 2013.
DECC added that Northern Ireland will put in place its own system for investigating energy market abuse and enforcing penalties. The Northern Ireland Authority for Utility Regulation (NIAUR) will be given powers mirroring Ofgem', according to DECC. NIAUR's proposed regime will come into force when its equivalent regulations have been formed. This will be no later than August 2013, DECC said.
The UK's Secretary of State for Energy, Edward Davey, said the new rules were to protect consumers from paying artificially inflated prices for energy. "It is vital that we have all weapons at our disposal in the fight against unlawful activity in the energy market," Davey said. "It is my role to protect consumers, particularly the most vulnerable, who can suffer the most when markets are abused."
Ofgem's senior partner for markets, Andrew Wright, added that these new powers were also designed to improve liquidity and transparency in energy markets to ensure they are free from manipulation.
The crackdown is part of the European Union's new REMIT Regulation, which aims to prevent the use of insider information and other forms of market abuse to distort wholesale energy prices. If wholesale prices are artificially inflated it can mean that businesses and consumers pay more for their energy than they need to.
Allegations of gas market manipulation surfaced in November 2012 when a reporter from ICIS Heron, a price reporting agency, claimed wholesale gas market prices were regularly being manipulated.
The reporter claimed that some of the largest energy companies in the world were involved in attempts to either raise or depress wholesale gas prices. Small fluctuations in wholesale energy prices can cost or gain energy trading companies large amounts of money, depending on their position as a buyer or seller in the market.
Last month the European Commission made unannounced inspections of several energy companies, including Statoil, BP and Shell. The London offices of Platts were also inspected.
Ofgem and the Financial Conduct Authority continue to examine allegations of gas market price-manipulation raised in November 2012.