Caroline Flint says people 'don't trust' energy sector after former price reporter claims firms manipulated wholesale market
The shadow energy secretary, Caroline Flint, has called for "open and transparent" trading in energy after it emerged that the Financial Services Authority is investigating claims that major power companies have manipulated Britain's wholesale gas market.
With the energy secretary, Ed Davey, due to make a statement to the Commons on the issue on Tuesday afternoon, his Labour counterpart said the public had no faith in the way energy prices were calculated in an era of seemingly permanent price rises.
The deputy prime minister, Nick Clegg, said members of the public would be "rightly dismayed" by the claim that the gas market was being rigged. The allegations reported in the Guardian needed to be investigated "very thoroughly", he said.
"We will give every level of support that the government can and should to the FSA and Ofgem so that we can find out what has been going on," Clegg said.
On ITV's Daybreak programme, Flint said there was a wider issue at stake. "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," she said. "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.
"We need a situation when all the energy is put in a pool and the people who trade in it do it in an open and transparent way. Energy companies constantly tell us that part of the reason they have to raise their prices is because the wholesale price is going up. If there is any whiff that the way they are set is manipulated it should be fully investigated."
The whistleblower, Seth Freedman, a former City trader, worked as a price reporter at ICIS Heren, a company responsible for setting so-called benchmark prices, upon which many wholesale gas contracts are based. He told the Guardian he believed unusual trading patterns showed prices were being manipulated "on a regular basis".
ICIS Heren has warned the energy regulator Ofgem about apparently suspect trading on 28 September, the end of the gas financial year and thus a date that can have an important influence on future prices.
Asked about the issue on BBC Radio 4's Today programme, Greg Clark, the Tory MP who is financial secretary to the Treasury, said if the claims were true "action needs to be taken very quickly".
"If these allegations are correct – and of course they are allegations at this stage – they are of the utmost seriousness," he said. "When people are struggling to pay their gas bills of over £1,000 – the average is about £1,300 – the idea that the bill they are struggling to pay people may be profiting from manipulating is totally unacceptable."
Davey has said he is "extremely concerned" by the allegations. A spokeswoman for his department, the Department of Energy and Climate Change (DECC), said the government took any alleged market abuse "very seriously".
"At a time of economic uncertainty and rising global energy prices, British consumers deserve markets that are fair," she said. "It's important not to pre-empt the work that the enforcement agencies already have under way to assess the detail of the allegations made. The FSA and Ofgem have a range of powers available to them and have our full support in applying the law and ensuring that any wrongdoers are held to account.
"DECC officials and secretary of state Ed Davey have been in close contact with the FSA and Ofgem since we became aware on Friday. We stand ready to support their work and provide any assistance that we can. The government has a strong record in providing the regulators with powers to regulate conduct in our markets. Where gaps in powers have been identified, action has been taken.
"We acted swiftly to tackle the attempted manipulation of Libor and Euribor and we are in the process of giving Ofgem more powers to tackle abuses, including the EU Remit legislation. These powers will be in place ahead of schedule by the spring, making the UK one of the first countries to do this. If further steps need to be taken, then that is what we will do."