Statement to Parliament on Allegations of Fraud in the Gas Market - Flint13 November 2012
In Parliament earlier today, Caroline Flint MP, Labour’s Shadow Energy Secretary, responded to the Energy Secretary Ed Davey's statement on Allegations of Fraud in the Gas Market:
Can I thank the Secretary of State for advance sight of his statement.
The wholesale gas price makes up around half of the average consumer bill.
Energy companies are very quick to blame wholesale costs when they put up people’s bills, so any suggestion that the wholesale gas market has been manipulated is a very serious allegation, which needs a full and rapid investigation.
As the Secretary of State has said, both the Financial Services Authority and Ofgem are looking into these allegations.
On the investigation being undertaken by the FSA can I ask the Secretary of State three very clear questions:
First, when did the FSA initiate their investigation, and if he was informed about these allegations on Friday, why did he not come to the House yesterday, instead of leaving the public to learn of them through the press?
Second, can he provide the House with any more information about the remit of the investigation and its terms of reference?
And third, when does he expect the FSA to report their findings?
Separately, I understand that Ofgem are also “looking into” specific allegations made by a price reporting agency, about unusual trading behaviour on 28 September, which is the end of the gas financial year and a key benchmark for future prices.
Can the Secretary of State confirm today whether or not Ofgem have actually launched a formal investigation into these allegations, and, if so, how Ofgem’s investigation will be different from the one being conducted by the FSA?
Can he also tell the House when Ofgem were first notified about these allegations, and whether they informed his Department?
Can he also say a little more about what the role of the Office of Fair Trading will be?
Mr Speaker, whatever the outcome of these investigations, the truth is, these energy companies have been allowed to run their businesses in such a complicated way that it’s almost impossible to know what the true cost of energy is.
And the allegations that have been made in the last twenty four hours suggest there are deep structural problems with the way our market works and is regulated.
That’s why over the last year I have been arguing for radical reform to the energy market to make it more transparent and more competitive, as well as the creation of a tough new regulator.
On the first point, does the Secretary of State agree that the main reason it is so difficult to work out what the true cost of energy is, is because we have a situation in which most energy is bought and sold through secret backroom deals and energy companies are allowed to generate power, buy it from themselves and sell it on to the public?
And does he agree with me, that with the Energy Bill due imminently, now is the time to force the energy companies to sell all the power they generate into an open pool, which anyone could bid to retail to the public?
This would improve transparency, increase competition and put a downward pressure on bills.
On the second point, if the existing regulation in the energy market was working properly, why has it taken a whistleblower to bring these allegations to light?
When we last debated the energy market two weeks ago, the Secretary of State defended the existing regulator Ofgem and said that my proposals to create a tough new regulator, with a statutory duty to monitor the relationship between wholesale and retail prices, would be” very damaging to the interests of energy consumers”.
In light of these allegations, can he tell me today whether he still has confidence in Ofgem?
Mr Speaker, energy bills have risen by more than £200 in the last two years – and the latest round of price hikes will add another £100 this winter.
Business as usual is not an option.
Today’s allegations of price fixing in the gas market show it is more important than ever that we reform Britain’s energy market to make it fairer and simpler and create an energy market the public can trust.