As 2016 begins, energy market participants must prepare for the second and final phase of data reporting under the EU Regulation on wholesale energy market integrity and transparency (“REMIT”). Moreover, the EU Agency for the Cooperation of Energy Regulators (“ACER”) and National Regulatory Authorities (“NRAs”) are demonstrating an increasing willingness to use their respective monitoring and enforcement powers under REMIT, and to share data and intelligence with each other. This all leads to an increased compliance burden on market participants.

REMIT Reporting: Phase 2

The first phase of REMIT transaction reporting commenced on 7 October 2015. This required market participants executing wholesale energy transactions on an organised market place to: (1) register with their NRA; and (2) report such transactions to ACER. The second phase, requiring market participants to report non-standardised transactions (i.e., those not executed on an organised market place), and also to register if they have not already done so under phase 1, commences on 7 April 2016. In each case, reporting must be done via a registered reporting mechanism (“RRM”). Currently, 40 RRMs have been approved for phase 1 reporting, and ACER has indicated that there are over 700 further RRM applications in the queue for phase 2; the majority of these come from market participants who intend to self-report.

CEREMP

Firms registering as market participants via their NRA will then appear on the Centralised European Register of Energy Market Participants (“CEREMP”), a database maintained by ACER. ACER compiles the national registration data submitted by NRAs, and keeps it updated on a regular basis.

There currently are more than 4,500 firms registered in CEREMP. As recommended by Recital 21 of REMIT, ACER intends to launch a public consultation to assess the “functioning and usefulness” of the CEREMP in the first quarter of 2016. Market participants who wish to provide comments on the functioning of the CEREMP should monitor for this assessment in the coming weeks.

REMIT Investigations and Sanctions

With the enhanced tools now at the NRAs disposal, including, in many cases, the ability to bring criminal sanctions, the requirement for market participants to ensure they are compliant with REMIT has never been greater.

Two recent public fines levied by NRAs are setting the scene for a new era of enforcement against market participants for breaches of REMIT. The Spanish NRA, the Comisión Nacional de los Mercados y la Competencia (“CNMC”), fined Iberdrola 25,000,000 EUR for manipulating the wholesale energy markets over three weeks between 30 November and 23 December 2013. The regulator determined the energy company’s actions constituted a “very serious” breach that aimed to alter the price of electricity or measurement of the quantities delivered.[1] The energy company intends to contest the allegations and has the opportunity to file an administrative appeal before the Spanish National Court within two months.

In addition to this, Elering, the Estonian TSO, has been fined 10,000 EUR for a failure to publish inside information in a timely manner.[2] The alleged breach took place in June 2014 during maintenance of the interconnection between Estonia and Finland, which resulted in an outage. Elering stated in a press release[3] that it will contest the alleged violation and intends to dispute it in the administrative court.

The latest REMIT Quarterly states that ACER has 47 cases under review for a breach of REMIT. The number of investigations is consistently increasing, as more investigations are opened than are closed each year. With the first phase of REMIT data reporting in force, ACER indicated in the new REMIT Quarterly that over 1 million records of transaction data are reaching ACER every day.[4] ACER will have even more information about potential breaches of REMIT when the second phase of reporting commences on 7 April 2016.

Further developments in enforcement are pending in the UK. The Department of Energy and Climate Change (“DECC”) has set out a consultation which, if passed, will heighten the powers of the UK Office of Gas and Electricity Markets (“Ofgem”) in its enforcement of REMIT.

Under these new rules, Ofgem would have a “seize and shift power” to remove documents from premises and review them elsewhere during the course of a market abuse investigation. It also would allow the UK Competition and Markets Authority to disclose relevant information about potential breaches and other information supporting the enforcement of REMIT to Ofgem, and the proposal calls for a longer time frame for Ofgem to complete its investigations.

Given the impact of these developments, EU energy market participants should ensure that REMIT compliance remains a high priority.