As I noted here a few weeks back, I've been in the UK gas business for almost twenty years on the commercial and industrial markets. I've bought literally billions of pounds worth of gas for end users ranging from chip shops to steel mills. To think tonight's revelations are news is naive in the extreme. When I worked in that market (I've been gone for four years), unexplained gas price movement were a continual source of amusement and cynicism among those of us who knew anything about wholesale markets. Prices would constantly act in bizarre ways that acted counter to basic drivers. But they did so because Ofgem and the FSA was so essentially clueless. Alistair Buchanan should go because he is the Inspector Clouseau of energy markets. You could tell him anything.They would also openly manipulate the market via the Price Reporting Agency's. I recall traders from one company telling me how that whenever the Heren Index reporter called at 1700 they would take turns to make things up when they explained price movements to her.
Ofgem said it had been given material "relating to trading in the gas market and is looking into the issue". The energy regulator said it had limited powers in this area but would "consider carefully any evidence of market abuse brought to our attention as well as scope for action under all our other powers".
The City and energy regulators are keenly aware of the growing political concern that high energy prices, which are linked to wholesale values, can increase fuel poverty and undermine economic growth. , he Green MP Caroline Lucas said: "If these revelations stand up to analysis by the FSA and Ofgem, then this is corruption on a massive scale and a shameful case of corporates coming together to exploit a public utility."
But this starts of course with the really big lie. The Big Six, starting with the biggest one of them all Centrica has told Buchanan how they would have to raise (rarely lower) prices because they would buy gas months or years in advance. And Ofgem believed them! Notice how Ofgem is trying to weasel out of this. It's never their fault.Has he never heard of a derivative? This from an RWE presentation of two years ago (Centrica wouldn't release theirs from the same event) shows how complex the market actually is. I have no idea what this means either. I (and everyone else in the UK) simply had to take the price. With a regulator asleep, we had no other choice.
But the complexity shows that if it's so complicated no one can understand it, combined with constant bizarre price swings, there may well be something to Seth Freedman's accusations. Certainly the idea that my gas bill goes up because a supplier buys gas on one particular day and can't unwind the position is patently ridiculous. But we've always known that. One can't underestimate the derision and laughter that surrounded Ofgem among traders.
One also can't underestimate the damage this has done the UK economy. But the press, and Ofgem were serenely disinterested. Now they've suddenly woken up? Everyone should be disgusted. But me: I'm with Lous Renault.