Last month saw the commencement of data reporting under the European Regulation on Wholesale Energy Market Integrity and Transparency (“REMIT”). It is reported that the Agency for the Cooperation of Energy Regulators (“ACER”) has successfully started collecting data and had received more than one million records of transactions of wholesale energy market contracts.
REMIT came into force on 28 December 2011 and provides for an EU-wide monitoring regime to detect and deter market abuse in wholesale energy market. REMIT is an attempt by the European Parliament to create a similar framework to that which exists under the Market Abuse Directive in respect of financial services products.
REMIT provides for a shared responsibility between ACER and the National Regulatory Authorities (the “NRAs”) including the Commission for Energy Regulation (the “CER”) in Ireland. ACER has been tasked with collecting and reporting wholesale market transaction data across the EU and performing an initial assessment of anomalous events, before notifying suspicious cases to the NRA.
REMIT applies to “market participants” which means any person, including transmission system operators, who enters into transactions including the placing of orders to trade in one or more wholesale market.
The 3 Pillars
REMIT consists of 3 pillars:
(i) the prohibition on insider trading and market abuse;
(ii) the mandatory requirement to register with NRAs, to report trading information to ACER and to publish inside information to market; and
(iii) the implementation of new monitoring enforcement and investigation roles for the NRAs.
The 3 Phases
The REMIT registration and reporting process has been divided into 3 phases, as follows.
(i) registration of market participants as Registered Reporting Mechanisms (“RRMs”) with the NRAs, including the CER, was required by 17 March 2015;
(ii) reporting to ACER of wholesale energy supply and derivatives contracts admitted to trading at organised market places such as the Single Electricity Market commenced on 7 October 2015; and
(i) reporting to ACER of the remaining wholesale energy contracts (over the counter standard and non-standard supply and derivatives contracts and transportation contracts), and fundamental data applies from 7 April 2016.
The CER launched a link to ACER’s online REMIT portal (the “CEREMP”) earlier this year which allows the market participants to register as RRMs and makes various supporting documentation available. The CEREMP can be accessed here.
Failure by the required market participant to register with and/ or report to the CER in accordance with REMIT is an offence and is liable to a fine of up to up to €50,000 for an individual and €500,000 for a body corporate on conviction. The CER also has extensive investigatory and enforcement powers including the power to request documentation, to carry out on-site inspections and freeze or sequester assets.
In a statement released by ACER on 7 October, ACER Director, Alberto Pototschnig, said in relation to the receiving of data that ACER and the NRAs “will have for the first time a full picture of trading in European wholesale energy markets, which can be used to detect, and thus deter, market manipulation and insider trading…market participants can be reassured that they all trade on the basis of the same information and consumers that the energy prices they pay reflect market fundamentals and are not distorted by market abusive behaviour”.
While the European Parliament’s ambitions of increased transparency, competitiveness and security of supply are widely supported in the market, concerns have been raised in relation to the extensive and ongoing reporting requirements REMIT places on wholesale energy market participants and the adverse effect that this could have on the liquidity of energy markets, the cost of trading and ultimately the consumer. Uncertainty remains around the level of information to be provided by market participants. In particular, the definition of “inside information” remains open to interpretation and while the guidance from ACER is helpful, it is not definitive. ACER has acknowledged that some of the concepts and definitions used in REMIT are likely to be subject to interpretation by national and European courts and will evolve over time.