Downing Street has urged the Financial Services Authority (FSA) and Ofgem to speedily investigate a whistleblower's claim that Britain's wholesale gas market has been frequently manipulated by energy companies.
The allegations, revealed by The Guardian, suggest the £300bn market has been fixed in a way similar to bank fiddling of the Libor interest rate.
The FSA , the City watchdog, said: "We can confirm that we have received information in relation to the physical gas market and will be analysing that material."
Ofgem , the energy regulator, said it had also received information relating to trading in the gas market and is looking into the issue.
The allegations come with the energy sector already under fire after major energy suppliers announced inflation-busting price rises.
It is understood the Treasury and the Department for Environment were alerted to the market manipulation claims by Ofgem and the FSA on Monday.
Energy Secretary Ed Davey said: "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."
An Ofgem spokesman said: "In preparing for full implementation of new EU legislation (Remit) to tackle market abuse, we will consider carefully any evidence of market abuse that is brought to our attention, as well as scope for action under all our other powers.
"Ofgem has already activated its established procedures to review the information we have received."
UK energy companies EDF Energy, NPower, SSE, ScottishPower, E.On and British Gas have all denied any involvement.
The whistleblower, Seth Freedman, works as a price reporter for ICIS Heren, a company responsible for setting so-called benchmark prices.
Mr Freedman raised the alarm after identifying what he believed to be attempts to distort the prices reported by the company.
ICIS said in a statement that it had "detected some unusual trading activity" on the British wholesale gas market on September 28, which it reported to Ofgem in October.
"The cause of the trading pattern, which involved a series of deals done below the prevailing market trend, has not yet been established," an ICIS spokesman said.
"ICIS welcomes the seriousness with which the regulator has so far responded to this information and we have provided all the evidence at our disposal to help the regulator determine what happened."
It is believed that on September 28 prices went down by about 0.4%.
Experts suggested that alleged manipulation may have been an attempt to maximise profit on an earlier trade position.
Shadow Energy Secretary Caroline Flint said: "These are very concerning reports which, if true, suggest shocking behaviour in the energy market that should be dealt with strongly."
The UK's biggest energy supply company, Centrica which is the parent firm to British Gas, said in a statement: "Centrica's traders are prohibited from providing price information to price reporting agencies.
"It's important to stress that the wholesale gas market has more than 50 participants, not just energy supply companies, handling hundreds of trades every day.
"It is in everyone's interests that there is a well-functioning and orderly wholesale energy market."
RWE npower also commented: "We were not involved in any of the trades which we understand are under investigation. We would be happy to support any regulatory investigation."