City watchdog probes energy prices

THE chief City regulator has been called in to investigate suspected market rigging that may be the cause of the big rises in electricity and gas bills about to hit consumers.

The Financial Services Authority is examining whether the market has been manipulated by wholesale suppliers of gas to power generators and retailers.

A huge jump in wholesale gas prices in October - already described as unjustified by energy regulator Ofgem - will feed through to bills within weeks.

Powergen has announced that its gas prices are going up 5% and its electricity by 6.9%. British Gas is raising gas and electricity prices by 6.9%, while nPower is putting gas up by 5% and electricity by 6%.

An FSA spokesman said: 'We are gathering data and looking at it.'

Any company found guilty of price fixing could be liable for fines of up to 10% of UK turnover.

Ofgem chief Alistair Buchanan said: 'I am concerned that this price rise does not seem to be justified by market conditions.'

The 80% wholesale price surge came in a warm spell when demand was low and there were no supply problems

.

Alan Asher of consumer watchdog Energywatch welcomed the FSA intervention, saying the surge was difficult to explain from legitimate factors.

'On the surface, there was the appearance of collusive conduct or price fixing,' he said.

But some traders argue that the price spiked higher because of jitters at the time over the amount of gas Britain will have to import in future years.