by Trevor Loveday
As evidence mounted this week of price-rigging in gas trades, questions were being asked about the adequacy of UK regulation to deal with it.
Industry analyst Patrick Heren said suspicious trades happened “fairly regularly” and Ofgem and the Financial Services Authority (FSA) were “not interested” in his experience. Former gas trader Nick Grealy said he had witnessed “dozens” of suspicious trades. “The regulator would just say ‘don’t worry about it’,” he said.
Shadow energy secretary Caroline Flint repeated Labour’s call for Ofgem to be replaced.
The latest allegations of gas market manipulation emerged after a worker at price-reporting agency ICIS Heren claimed to have seen anomalous bids by traders on 28 September. Ofgem and the FSA are investigating. Earlier reports from Reuters cited instances of suspicious bids in UK gas wholesale markets in August. “Loss-leading trading happens across all energy markets I know of,” an unnamed trader told the news agency.
Should wrongdoing be proven, gaps in the regulatory regime could obstruct penalties. European rules prohibit price-rigging but the regulator will not be able to enforce penalties until next year. Ofgem regulates physical trading of gas and the FSA presides over trades in financial derivatives. “It raises the question of who has got jurisdiction,” said Peter Willis, partner at law firm Bird and Bird.
This article first appeared in Utility Week’s print edition of 16th November 2012.
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