UPDATE: UK FSA: Looking Into Alleged Gas-Market Manipulation

Date : 11/12/2012 @ 4:03PM
Source : Dow Jones News
Stock : Barclays (BCS)
Quote : 10.0  0.03 (0.30%) @ 12:06AM
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UPDATE: UK FSA: Looking Into Alleged Gas-Market Manipulation

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(Adds detail and U.K. authorities' comments throughout.)

By Alexis Flynn

LONDON--British regulators are looking into allegations that some of the country's biggest utilities have manipulated the U.K. physical natural gas markets, the U.K. Financial Services Authority and energy watchdog Ofgem said Monday.

The allegations come at a time of increased scrutiny by authorities of how energy markets are regulated and of the relationship between physical commodities markets and associated derivatives.

"We can confirm that we have received information in relation to the physical gas market," the FSA said. "We take market misconduct seriously and will be analysing the material."

Energy Secretary Edward Davey said, "I am extremely concerned about these allegations and will be keeping in close touch with the regulators while they get to the bottom of this."

Mr. Davey will make a statement about the matter on Tuesday afternoon in the House of Commons, the Department of Energy and Climate Change said in a statement.

Separately, the Office of the Gas and Electricity Markets, or Ofgem, said it has "received information 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 U.K. regulators' examination of the allegations follows a separate incident in the U.S., where the federal energy-market regulator sought a record $435 million in penalties in late October for Barclays PLC's (BCS) alleged manipulation of western U.S. electricity markets from 2006 to 2008. The U.K. bank has said it is investigating the matter itself and cooperating with authorities there.

Energy price-reporting firms have also come under recent scrutiny as the Group of 20 major economies commissioned a report into how to supervise the largely opaque and unregulated trade in oil cargoes. The report laid out a set of principles to prevent price manipulation in the oil market, but did little to go beyond the main agencies' already-established voluntary practices.

The Guardian newspaper reported Monday that the market-abuse concerns were initially raised by a former City of London trader who worked as a price reporter at ICIS Heren for nine months.

An attempt by e-mail to reach the man named in the Guardian article as the whistleblower wasn't immediately answered Monday night.

A London-based ICIS Heren editor also couldn't immediately be reached for comment Monday night.

The U.K. Department of Energy and Climate Change, or DECC, said its officials and Mr. Davey have been in close touch with the FSA and Ofgem since they became aware of the matter on Friday.

DECC said it is working to give Ofgem more powers to tackle abuses, with new powers to be in place by the spring. "If further steps need to be taken, then that is what we will do," DECC said.

Write to Alexis Flynn at alexis.flynn@dowjones.com

(Leia Parker, Sarah Kent and James Herron in London contributed to this article.)

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