Gas Market Manipulation

backfoot

jd87 wrote: »

Over 4 years ago, and I wasn't asking what Economy 7 was, I was asking about the meter and whether I should be on it. My "area of expertise" is not domestic electricity and I never said it was. Can we stick to the topic?

Of course. I started the thread to follow the news and to help readers follow the story and exchange understanding of this highly complex area. What I found astonishing was that you and other posters were making instantaneous assessments on the outcome.

Dominic Lawrie has just done a report on 5 Live and explained that the Gas Market was essentially split into two main parts. A spot type market for current trades akin to the stock market where the price is easily tracked. Then a second and much larger market which he called the 'exchange market' where supply companies buy off a producer,( but the producer is anonymous). and it is this Price Tracking company which rings round the supply traders to find out the prices traded.

The suggestion is that incorrect data has been put into this process to give false trends and false end of day positions upon which settlement is made.

None of this was mentioned by you 'experts' so does any of this make sense to you? No mention of pure commodity trading was made.

Caroline Flint was then interviewed and she said Labour didn't trust this system and wanted all transactions to be handled in one pool with the ability to audit all these transactions.

The Founder of the Price Reporting company is to be interviewed after six on 5 Live, but I will be out so would be grateful for someone to precis what he says please.

backfoot

grahamc2003 wrote: »

I really don't think there's anything in it for the gas/electric energy players by fixing prices - apart from jail if they're caught doing it. So no pros, and a serious con - why would they do it? Traders on the other hand could I suppose make millions if they could fix the price.

That could well be the motivation of individuals rather than the suppliers. Even if the investigation proves nothing more sinister then hopefully they will streamline the system (like LIBOR ) and make it understandable to us all.

At the moment, I doubt there is anyone who could honestly verify that end User prices are correct fair or not.

I am also hearing that the Whstleholder Company had previously notified Ofgem but they didn't have powers to fully investigate! So that's another angle regarding weak Regulation and if they couldn't do anything what were they doing about it? Don't answer that....:rotfl:

meggsy

A second person has now come forward -

http://www.guardian.co.uk/business/2012/nov/13/second-gas-price-reporter-market-manipulation?CMP=twt_fd&utm_medium=twitter&utm_source=dlvr.it

meggsy

backfoot wrote: »

I am also hearing that the Whstleholder Company had previously notified Ofgem but they didn't have powers to fully investigate! So that's another angle regarding weak Regulation and if they couldn't do anything what were they doing about it? Don't answer that....

Where have I heard that before :eek: Oh yes on the gas sculpting thread !

MillicentBystander

Jason Torquato, who worked at ICIS Heren, said he was certain any manipulation of indices from the price-reporting agencies, such as ICIS, could "influence retail gas prices".

Who to believe? The 'insiders' on here say no, the insider at ICIS Heren says yes/maybe. it's all very curious. Thatcher should be ashamed of herself.

steve-L

backfoot wrote: »

None of this was mentioned by you 'experts' so does any of this make sense to you? No mention of pure commodity trading was made.

I think I used the words 'pure commodity' several times .....

Its like the normal stock market vs. futures market.

Caroline Flint was then interviewed and she said Labour didn't trust this system and wanted all transactions to be handled in one pool with the ability to audit all these transactions.

Hmmmm..... and if labour were in power ?
The issue is as I said, we don't have anything better.....

The Founder of the Price Reporting company is to be interviewed after six on 5 Live, but I will be out so would be grateful for someone to precis what he says please.

I missed it, out with my kid..... but my interest is actually more around the way people who should know better are pretending the Emperors New Clothes are astonishing!

The total surprise that there is an elephant in the room that the energy ministers have been tripping over since deregulation.

I'm not an expert in Energy Trading by the way... but other parts of energy... What I know is actually through working with a lot of consultants who are ex-traders or work with traders every day.... and the fact as part of my job I need to know about energy companies in general..... so a lot more than a bloke on the street but a lot less of 'a day in the life of an energy trader' than some colleagues I work with.

I note JD didn't answer what his expertise is for the original comments. Interestingly one of his threads was seeking an explanation of what Economy 7 was, yet now he can draw conclusions within hours, about the complex workings of the upstream gas market.It's a spectacular testament to our Education System

Its not really.... I worked in operating oil and gas companies for almost 20 years..... in all that time I never knowingly met a trader and outside my own domestic use anyone in downstream sales (like a petrol station) or gas supply... of chemicals or refinery....
(Actually once I had to set up a Video Conference for retail (pump sales) people when they borrowed our VC room but other than that.....

It's difficult to explain just how separated these are....... I worked most of that 20 years expat and I know far less in a lot of areas about the UK consumer supply than most people on the street who lived here for 20 years!

Its not just you..;)... I sometimes get dragged into my companies meetings as a subject matter expert on 'energy' (having 20 years working for them) and often have to explain how little I know about some areas!

Even when working inside a energy company (at managerial level) you still don't really know what's going on in other divisions despite occasional HR/Comms led get-togethers....or 'well done' for a good financial year type speeches....

This is exactly how the board want it!

From my perspective I don't have any issue that jd87 knows nothing about economy 7 .... neither do I..... (above and beyond the average Joe).....

Millicent wrote:

Jason Torquato, who worked at ICIS Heren, said he was certain any manipulation of indices from the price-reporting agencies, such as ICIS, could "influence retail gas prices".

Hmmmm...... he would or there is no story!
It doesn't matter to me..... who you believe.....

Thatcher should be ashamed of herself.

Ah, we certainly can agree on that!

The truth is its been rotten as long as MP's expenses..... but I don't believe it will affect the end consumers energy bill EXCEPT by the news story changing the spot and futures prices all by itself!

The very fact it has become a media story likens it to the 'big surprise about Jimmy Saville' ... where everyone knew but noone said anything .... ????

Terrylw1

But is the impact to the consumer price equal to all?

I know less about gas and there are less distributors as well as meter types. If you applied this to elec though, since we have heading towards 100k lines of controlling price data between suppliers & distributors, its not as simply. Then we would have the usual demand issue since each distributor charges different prices (since distribution has never taken off in privatisation) and will consider a smaller supplier portfolio of loss interest than a major portfolio e.g. ex host regional suppliers.

In terms of impact to consumers, it will never be a positive. If the 'umbrella' can obtain a cheaper price in company X (buying arm, inline with Steve's explanation), that doesn't mean an impact to company Y (the supplier) because the consumer doesn't know about company X's win on prices, hence company Y just keeps its prices the same.

So, the 'umbrella' gets more profit. However, what was wrong with reducing prices inline with this to benefit the consumer? Surely the answer is - what we don't know, we don't miss?

I don't know the impact into gas consumers but in the elec world, the impact isn't as straightforward due to the many types of meter & methods of tariff balancing.

So, can anyone explain this part?

Perhaps we should also consider the cumulative impact? Not long ago we had a report on another utility scam in elec with generation & government payouts.

backfoot

I did catch the interview with the founder of the Price Reporting company.

One key issue he spoke about was a big oil company often putting in false last minute high trades before close. It was apparently known as a regular tactic and the Price Reporter eventually stopped it and just ignored the data to stop the distortion.

So for me,what was apparent that this 'manual' system was/is being abused as an easy target but if it was pushed too far then the attempted manipulation was self defeating.Magically,they didn't report it and not surprising really as it would have undermined their own business model.

The message even from our in house experts is that the system isn't robust and is manipulated. The extent and impact is the bit for the investigation to determine.

Can't see this particular process surviving in its current format.

MillicentBystander

Mr Heren's performance on Newsnight reminded me of Mr Entwistle's in front of the Select Committee. Not good/confidence inspiring. Total layman when it comes to these things but it just appears to be a massively over-complicated way of doing things?

meggsy

See the Newsnight programme here .. it's the first item .. with the studio interview about 7 mins in ..

http://www.bbc.co.uk/iplayer/episode/b01nzqvy/Newsnight_13_11_2012/