REPUTATION AT STAKE IN ENERGY SECTOR PRICE FIXING SCANDAL
Corporate reputation is a fickle beast. It can flare up when least expected. In the case of the British energy companies that manage rates for oil and gas, a Libor-style melee may be in store.
Energy regulator Ofgem and the Financial Services Authority (FSA) have been investigating huge increases in gas prices and uncovering what may be covert price-fixing of wholesale gas contracts. Britain’s six largest energy suppliers are already being scrutinised for malpractice in selling energy to residents.
Questions remains, as this incident is examined further, about the reputational effects on the British energy business and on Ofgem and the FSA as industry regulators. The six companies under question have denied involvement in price manipulation, however, if investigations unveil a scandal, the effects on reputation may be great in an already criticised industry.
Angela Knight, CEO of Energy UK says, “Customers need to have confidence in markets and authorities need to have the powers to regulate well and take action if required."
Collusion among industry price-setters could implicate energy companies in the scandal and create public outrage on the scale of the banking crises of the past few years. The Libor scandal fundamentally discredited not only the system itself but the British Banking Association as a regulating body. The potential energy industry scandal may evoke a similar collapse in reputation.
Caroline Lucas, MP for the Green Party, says, “If these revelations stand up to analysis by the FSA and Ofgem, then this is corruption on a massive scale and a shameful case of corporates coming together to exploit a public utility.”
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