The Financial Services Authority (FSA) confirmed to IBTimes UK that it has launched a probe into allegations made by a whistleblower that UK traders were rigging wholesale gas prices, which in turn would manipulate the pricing of Europe's largest gas market worth £300bn.

A spokesperson at the FSA said that it can "confirm [that the FSA has] received information in relation to the physical gas market and will be analysing the information."

The allegations stem from a pre-recorded video interview with the Guardian newspaper, when the whistleblower from independent energy pricing house ICIS Heren said that "traders submitted erroneous bids and offers to skew the end-of-day price of a key gas contract."

Analysts at ICIS Heren, along with a number of other similar firms such as Platts and Argus, would call up traders and brokers daily to ask and receive bid prices on a number of energy markets across Europe, including gas, power, oil, carbon and other energy products, such as jet fuel.

The analysts would then place the collection of bids into a report, which would then generate an average price and daily analysis for the market, and send this out to clients who would participate in specific energy contracts.

Reports produced by companies such as ICIS Heren are extremely important to the wider market, as benchmark prices are based on these generated independent average prices and could cost or save companies millions of pounds when they buy or sell to meet hedging demands or to physically stock their energy requirements.

The UK's energy secretary Edward Davey said he will make a statement in the House of Commons later on Tuesday but he announced that "I am extremely concerned about these allegations and will be keeping in close touch with the regulators while they get to the bottom of this."

A spokesperson at the Department of Energy and Climate Change (DECC) added that "the Government takes alleged abuse in our markets very seriously. It's important not to pre-empt the work that the enforcement agencies already have underway to assess the detail of the allegations made."

"The FSA and Ofgem have a range of powers available to them and have our full support in applying the law and ensuring that any wrongdoers are held to account. The Government has a strong record in providing the regulators with powers to regulate conduct in our markets. Where gaps in powers have been identified, action has been taken. We acted swiftly to tackle the attempted manipulation of Libor and Euribor and we are in the process of giving Ofgem more powers to tackle abuses, including the EU REMIT legislation," the person added.

Power Market Probes in the US

Over recent weeks, IBTimes UK has questioned whether manipulating the power markets is the next big scandal to unfurl.

In the US, Barclays became the latest bank to be investigated by US authorities over its power trading activities.

While the bank revealed that the US Federal Energy Regulatory Commission (FERC) Office of Enforcement (FERC Staff) has been investigating Barclays' power trading in the western US between 2006 and 2008, it is actually the second bank this year to be under the spotlight for electricity market-related disputes.

Although Barclays said it intends to "vigorously defend" allegations from FERC, after the regulator notified Barclays it had authorised the issuance of a Public Order to Show Cause and Notice of Proposed Penalties against Barclays in relation to this matter on 25 October, JP Morgan is facing some very similar charges from FERC.