Gas Market Fraud

Part of Oral Answers to Questions — Justice – in the House of Commons at 1:30 pm on 13 November 2012.

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Photo of Edward Davey Edward Davey The Secretary of State for Energy and Climate Change 1:30, 13 November 2012

I am grateful for the right hon. Lady’s response. Let me try to deal with all her questions.

I understand that the FSA was approached by The Guardian and heard the information from the whistleblower last week. My understanding is that the FSA will follow the normal remit for any such investigation, considering whether an offence has been committed once it has looked at the allegations and reviewed the evidence. Of course, we cannot give detailed timing for that, and I am surprised that the right hon. Lady expects me to do so. That is a matter for the independent regulatory bodies, as they go about their process in the proper way.

The right hon. Lady asked why I did not come to the House yesterday. The reason is that we have rules to protect whistleblowers. It would have been quite wrong for me to come to the House before the whistleblower had made their statement. I hope she accepts that. We were ready to come to the House, but we were waiting for the information to enter the public domain in the proper way, and I have come to the House in the first instance after that.

The right hon. Lady asked about Ofgem’s role. Ofgem is working jointly with the FSA and it is important that it does so, because we do not yet know, as it looks at the allegations, whether there has been a problem in the energy markets—the physical markets—or the financial markets. We do not know whether financial services regulations or other regulations will have to be used, so Ofgem is engaged, just as it should be, in working with its fellow regulators.

The right hon. Lady asked whether the OFT would be involved. Again, that will depend on the nature of the allegations as they are analysed, and whether there has been an abuse—a breach—of competition powers in some way. Ofgem has concurrent powers with the OFT, as the right hon. Lady knows, but the OFT has more experience in some areas, particularly in prosecuting cartel offences. However, these are early days and this is speculation. We do not yet know whether the OFT would be involved, but clearly it stands ready.

The right hon. Lady then talked about the pool. She has concerns about the lack of transparency in energy prices, particularly electricity prices, which she and I debated in the last Opposition day debate on the issue. I explained that her proposals for a pool would not sort out the problem of liquidity. It is our proposal to bring forward reserve powers in the energy Bill, in case Ofgem’s proposals on managing auctions—or whatever it ends up deciding on improving liquidity—do not work. However, we on the Government Benches are absolutely committed to extra liquidity and more transparency of pricing, because that will drive competition, which is clearly the best way forward.

The right hon. Lady continues to suggest that the pool is the answer. These are early days, so it is certainly not clear that a pool would have helped with these offences. However, I remind her that it was the previous Government who abolished the electricity pool, partly because Labour Ministers considered it to be open to market manipulation and therefore detrimental to consumers—so her proposals for a pool are even less appealing as a result of these allegations.

The right hon. Lady now invites me to support her proposal on Ofgem, but from my experience of working with Ofgem and the FSA over the weekend and this week, and of having my officials work with them and seeing them in action, I take completely the reverse point of view. She ought to withdraw her proposal and support the role of an independent regulator. Ofgem has extensive powers; we are adding to them. Ofgem has used those powers where it has felt it necessary. Disbanding Ofgem at the moment would not speed up the investigation or help consumers with their bills now, so I am afraid I am not tempted to take up that proposal from the right hon. Lady. It would be totally unacceptable if people were profiting from manipulating energy prices, so I believe the whole House should back these investigations.