By Nicholas Earl
Ed Miliband has urged the government to investigate whether power trading firms are manipulating the UK’s electricity markets to ramp up their profits.
The former leader of the opposition and now shadow secretary for climate change and net zero labelled the latest media reports as “concerning.”
He said: “The government and Ofgem must urgently investigate the concerning situation regarding power traders charging excess prices for power. British businesses and consumers should not be footing the bill for market manipulations.”
The frontbencher’s latest comments follow Prime Minister Rishi Sunak’s condemning “unacceptable” behaviour by generators earlier this week
“Ofgem is aware of this concerning behaviour from a handful of participants involved and is urgently looking into it further,” a spokesperson for the PM said.
Power companies are under pressure after an investigation from Bloomberg revealed some of UK operators are using a permitted off-on tactic to reap extra revenues.
Its reported that SSE, Vitol and Uniper have been switching off their plants ahead of expected peaks in demand, only to then agree to keep them running in exchange for significantly higher prices to fill the shortfall.
According to Bloomberg, they have then offered power from their plants in a special side market where they charged higher prices to meet the shortfalls they helped to create.
This has seen energy companies rack up £525m between 2018 and 2022 – 90 per cent of which came in the last two years.
This practice has become more routine since the the lifting of Covid restrictions and then Russia’s war in Ukraine triggered further volatility in the UK electricity market.
Household energy bills are not expected to significantly drop until the second half of this year.
Ofgem has labelled the practice “immoderate” and “sharp” – attributing it to higher power prices – and investigated the issue in 2021, but was unable to determine any rule-breaking
Profit-making decisions are not considered rule-breaking, provided companies do not send “false of misleading” signals to the grid.
The watchdog intends to ban power stations using these off-on tactics from charging “excessive” prices that lead to more than a “reasonable profit.”
A final decision, after consultation with the industry, is expected in the summer.
“We do not believe that any attempts by energy companies to exacerbate tight market conditions, whether intentional or not, are in line with consumers’ interests,” a spokesperson said.
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