Energy regulator highlights price fixing in the wholesale energy market
A warning for the wholesale energy marketSince 2013, Ofgem has had the power to levy unlimited fines on traders which break market rules. So far it is a power which they avoided using in any high-profile way but the penalties for market manipulation are historically very steep. The renewed focus on market abuse comes a short while after the ‘big-six’ energy providers were cleared of price fixing and monopolistic behaviour by the Competition and Markets Authority. In this case, the CMA did not charge any of the suppliers, but they did highlight some problems and a growing concern that millions of energy customers were being overcharged for their gas and electricity. While Ofgem has, so far stopped short of launching an investigation into market abuse and failed to level any specific allegations, they have fired a warning shot at wholesale market participants. Market commentators believe that publishing this open letter is the regulator preparing to take action. Karen Anderson, a regulatory partner at lawyers Herbert Smith Freehills said “Wholesale market participants should consider the letter as a warning, effectively a shot across the bows, which, if unheeded, is likely to be followed by enforcement action.” Concern about the state of the wholesale energy market is nothing new. Regulators in the US and elsewhere have already brought cases against some large international traders like Deutsche Bank, JPMorganChase and Barclays. Whether the Ofgem probe results in legal action remains to be seen. Hopefully, the threat of action will be enough to squash malicious trading, relieving some upward pressure on the price of energy.
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