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Government responds well to energy price fixing claims

13 November 2012

It is a busy day on the economic front, with new inflation figures (which are expected to show an increase) to be released at 9.30am and Ed Davey, the energy secretary, to address the House about further allegations (published in the Guardian this time) that the wholesale price of gas has been fixed by traders. The claims were made by a whistleblower, Seth Freedman, who used to work at ICIS Heren, an agency that reports on gas prices. The Financial Services Authority and the energy regulator, Ofgem, have both swung into action to investigate Freedman’s allegations.

It is only natural that the government would state its response to the House and outline the regulatory authorities’ plans. Yet it is also a sign of how seriously the government takes energy prices as a political issue. This morning’s newspapers have not covered this story in any great depth, partly because there is not much left to say after the Guardian broke the scoop; but the broadcasters, especially the TV broadcasters, have driven the point home in numerous bulletins and special reports this morning. Energy prices are the closest thing the early 21st century has to a ‘mob issue’. The allegations come on the back of a month of stories about huge gas and electricity price rises. These will drive up the cost of living, which will, in turn, make it harder for the government to convince voters that the very worst of the economic pain is over; and it must begin to frame such an argument as the electoral cycle turns towards 2015. The Treasury is understood to be worried by the prospect of dismal growth figures in Q4 of this year; stories such as these are likely only to darken its mood because they make the politics of the economics tricky.

The government has done well this morning; for once its communications operation has been wholly successful. Preliminary statements from Ed Davey appeared prominently on BBC Breakfast, suggesting that he is in control, that complete answers will be forthcoming and that order will be restored. Indeed, the government’s decisive response to this story shows that it recognises the essential sense of Ed Miliband’s much-mocked ‘predator capitalism’ speech at the 2011 Labour Conference. The fallout from the 2008 crash has changed the rules of the game entirely. It must be stressed that the allegations against the traders are as yet unproven; but, in popular terms, throw enough mud at something and some of it will stick. The government seems well positioned to dodge the incoming mud on this occasion.

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Show comments
  • Mat Peck

    Don’t you all see it? They say that veg prices are going up, cause, er its been raining. They say that electric prices are going up, cause its a fraud. Meat is going up, grain, petrol. But it aint a set of magic co-incidences. It’s . the . pound . thats . going . down . More QE anyone?

  • barbie

    The problem is we have had the ‘mud’ from the hike in bills, when will we get some respite. This is what you get when you sell off state controlled utilities. There is lack of control and greed sets in. Take note, most of the companies now are foreign owned, so that should be interesting reading.
    Many elderly people, poorer people, and sick and the disabled, are suffering from this greedy untiliy companies; they need cutting back and cutting to the quick they have done wrong. No proof yet, but like this article says, mud sticks, and I’d sooner believe the whistleblower. We have been conned. Cameron should step in and if found guilty fine them heavily or bring them back into state ownership, they bought them cheap any way.

  • John_Page

    The number of comments shows energy pricing is a hot topic. In 2004 the average household energy bill was £522. Now it’s £1,310. How much of this is due to (essentially short-term) manipulation? And how much is due to deliberate government policy on green taxes instituted by Ed Miliband?

  • itdoesntaddup

    Did anyone notice that the accusation is that prices were manipulated downwards?

    Also, as yet there is little to suggest who is being accused of manipulation (doubtless pending investigation). We should remember that large elements of trading relate to contracts for differences (CFD) based on price quotations – not real trades of gas – and that the commodities traders in banks are at least as active as those in energy suppliers – and they’re probably smarter.

    Here’s a scenario: Energy company buys a CFD to profit from rising prices. Bank sells the CFD. Bank manipulates price lower, makes a profit and energy company makes a loss, which it has to recoup by charging customers more.

    And of course Ed Davey is keen to deflect from the impact of ever higher ROC charges and carbon taxes and other costs of greenergy.

  • Pip

    I have never known such high prices for heating my house. If I heat my home for 3 hours per day – the cost is £22.47 per week – and that is just the gas bill. I have changed supplier to the cheapest tariff twice over the past 3 years. There is definitely something wrong – but fining the companies and putting the money into government coffers is not the answer. Refunding any overcharge due to any proven pricefixing (if there is any) to the consumer is the only decent route.
    Ofgen is an overpaid toothless joke, a useless sticking plaster to try and convince customers that the government actually gives a damn.

    • dalai guevara

      It’s not just necessarily just Ofgem in this instance – people are beginning to realise that cheap never mind peak oil is history. What would you say if I predicted a barrel of brent crude will set you back $300 by 2020? We are not even close to having an answer to that conundrum.

      • John_Page

        Wake up. Some claim shale oil will reduce the cost of oil. What if the US becomes self-sufficient soon?

        • dalai guevara

          Haha – one little press release and you are convinced?

        • Pip

          I have just found his article – really interesting I thought – hope it is of interest to you. I had no idea of the different types of shale and accessibility etc.

    • barbie

      I’ve invested in an oil heater, costs from Nov to March £10 for 100 litres of oil, we use this during the day. Its cut my gas bill by £400 per quarter; take off the cost of oil, £300, still a good saving. Heater is called Inverter, can be seen on Internet. It is special oil not cheap parafin. Cutting my heating bills was essential we only have pensions to survive on. We warm the room we live in during the day. Heating goes on in evening @ 7pm till 9.30pm, we monitor what we use, we have to. This heater is better than not being able to pay bills or taking money from food bills its a necessity for us. I too, use the Interenet to get the lowest tarriffs but its confusing knowing if you have got the best one. There are hundreds out there and it takes time and effort to get the cheapest. If this information helps anyone else, good. Are we not ‘all in this together’.

  • Paul R

    I fear that all that will happen over this, is the Tories will be recycling the “hot air” speeches about responsibility to consumers e.t.c. Then there will be the usual round of self congratulatory back slapping on the ConDem side of the house.

    On the opposition side of the house will be the usual head shaking and mutterings, warning of dire consequences.

    The people will march in protest, and the coalition will wring their scrawny hands, both in mock indignation – and the thought of how good the dividend from their shares will be, and those who did march in protest, will be largely ignored, in the hope that they will just go away.

    In the meantime, we just have to continue being ripped off, left, right and centre, and every other angle to boot.

    Vive la revolution!!! And let’s hurry it up, the people of this country shouldn’t have to be putting up with this modern day version of (legalised) highway robbery any longer. Let’s get the energy and water companies re-nationalised.

    • 2trueblue

      Well the opposition did little to help when they were in power so have little that they can whinge about now. they had 13yrs and the forward planning for our future needs were totally ignored. They signed us up to a carbon emissions program that is crippling. They were totally irresponsible. They had the majority to pave the road and did not, just lined their own pockets, gave away our gold…. well you can fill in the rest.

  • EcoHustler

    Community ownership is a way to avoid the buffeting (and price fixing) of energy prices.

    • dalai guevara

      Wow, someone is finally beginning to think straight.

    • racyrich

      Clubbing together and obtaining a group discount is also a way forward.

      What I wonder is how big the group can get. A whole county? A whole country? If it is the whole country is that a triumph for the free market or nationalisation by the back door?

  • 2trueblue

    This issue is not new, just happens that this government is trying to unpick it. During the 13yrs we had Liebore in power there were continual murmurings but no actions. It was obvious when the prices were hicked up and failed to level off when they actually came down for the suppliers. The previous government did nothing to tackle the problem.

    Interesting point re the prominence of a Tory minister getting coverage on BBC is in itself a positive thing. For years it has been the cheer leaders for the left. I do not care a jot who is to blame, but a level playing field in the media would be nice. No doubt we will have the usual ‘rent a mouths’ of the usual suspects later.

    • HooksLaw

      Prices did come down a while back.

      • Paul R

        Bullshit!!! All they done was fractionally reduce an original increase in prices.

      • 2trueblue

        The percentage drop bore little resemblance to where it should have gone. Similarly over the previous years when we had the massive hikes, followed by a miserable drop if any.

  • JP

    As yet unproven? Forget that, watch the mob feast!!

  • Swiss Bob

    Related tangentially if there are any journalists left at the Speccie:

    • HooksLaw

      The article reminds us of a ‘climategatre’ quote from an email by Alex Kirby to the widely discredited Steve Jones whichj reads
      ‘and being the objective impartial (ho ho) BBC that we are, there is an expectation in some quarters that we will every now and then let them say something’

      I suggest that the attitude displayed here is one which an organ like the Spectator should be campaigning against vigorously. unless the Spectator has been got at by the climate fascists as well.
      And I think ‘fascists’ is not too severe a term when the conspiracy against truth is so clearly exposed.

      The list (of self serving time serving pressure groups) of course speaks for itself. The BBC rigging opinion to justify its bias.

      • Swiss Bob

        It should be of interest, after all the BBC is in the process of spending hundreds of thousands of pounds trying to prevent the release of this report, just like the Balen report, except what they didn’t realise is that it was already in the public domain via the ‘waybackmachine’ !

  • BigAl

    Not surprising the cash strapped BBC were reporting on the Guardian scoop. After all the Guardian is the ‘resident’ paper and editorial compass of the BBC.

  • Mirtha Tidville

    Those of us paying these inflated bills have known this for a long time. Now its unravelling we want to hear from the government just how painful they intend to make it for the energy crooks…but dont hold your breath

    • HooksLaw

      If there is price fixing then people should go to jail.
      Bills are inflated to pay for the labour inspired and LibDem infatuated green energy subsidies. Just swallow that and don’t spit it out in front of us.

      • mirtha tidville

        Is it possible that just once you can reply to someone without showing your thick oaf Trevorsden

        • HooksLaw

          So bills are not inflated to pay for green energy subsidies for rich companies to mint easy money from?
          Whose thick?

          • dalai guevara

            No they are not ‘inflated’ at all by what you state. If you want to see a move away from fossil dependence to a position of gradual energy independence, you need to invest in local production.

            OTOH, local production is already so advanced in other places, that at least the producion of entire electricity requirements is not such a distant possibility for some. Localise production, make a home an energy generator, not a consumer for a start. I know in dark age Britain, this must sound like magic…

      • barbie

        I like the idea of jail, but somehow I think as the companies are foreign owned they’ll obscond abroad.

    • 2trueblue

      And for 13yrs it was ignored. There is still the real problem of the lack of forward planning for our fuel security that has been ignored during that period also. We are now doing even less and that is a big worry. P…..g in the wind comes to mind. We do need some real focus on our future needs before the lights go out.

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