The Financial Services Authority is to investigate the practices of Britain's energy firms after a whistleblower made serious accusations of price rigging in the wholesale market.
The alleged behaviour of the energy companies was brought to the attention of the FSA by a former City trader called Seth Freedman, who’d worked as a price reporter at ICIS Heren, an energy market intelligence firm, for the best part of a year.
"Traders have made clear to me that manipulation of gas prices is taking place on a regular basis,” he told the Guardian newspaper. "They name big companies among those they accuse of trying to rig prices and reap profits. Market participants claim the fixing of prices is an open secret.”
The accusations have remarkable similarities to the LIBOR-rigging affair which engulfed the banking industry earlier this year.
Energy secretary, Ed Davey, said: "I am extremely concerned about these allegations and will be keeping in close touch with the regulators while they get to the bottom of this."
Meanwhile, shadow energy secretary Caroline Flint said: "Whether these allegations prove right or not there is a huge lack of confidence in this country in the energy sector – people just don't trust it any more. Our energy bills have gone up by over £200 in recent years and in the last few weeks prices have gone up again, so these latest allegations couldn't have come at a worse time for people trying to heat their homes."
Britain’s wholesale energy market is estimated to be worth an estimated £300 billion, and when increases to consumer prices are made, wholesale energy costs are usually blamed. Last month, British Gas, Npower and Scottish & Southern Energy all moved to raise prices prices amid fierce criticism.