On 6 June, the Department for Energy and Climate Change laid the Electricity and Gas (Market Integrity and Transparency) (Enforcement etc.) Regulations 2013 (the Enforcement Regulations) before Parliament. The Enforcement Regulations implement the EU Regulation on wholesale electricity and gas market integrity and transparency (REMIT) in the UK. Subject to parliamentary process, the Enforcement Regulations will enter into force on 29 June 2013. The draft text of the Enforcement Regulations is available here.
REMIT prohibits insider dealing and attempted or actual market manipulation in wholesale energy markets and imposes a registration and reporting regime on market participants in order to monitor activity in wholesale energy markets. REMIT also requires Member States to establish an investigation, enforcement and penalties regime in relation to breaches of the REMIT requirements. Penalties must be effective, dissuasive and proportionate, in order to reflect the nature, duration and seriousness of the infringement, the damage caused to consumers and the potential gains from trading on the basis of inside information and market manipulation.
The Enforcement Regulations will give market monitoring, investigatory and enforcement powers (including the imposition of financial penalties) to Ofgem. As required by the Enforcement Regulations, Ofgem has issued a consultation, containing:
- Proposed guidelines on the use of Ofgem's powers under REMIT (the Procedural Guidelines);
- A proposed statement of policy with respect to financial penalties under REMIT (the Penalties Statement).
In the Procedural Guidelines, Ofgem has proposed to follow the current enforcement regime practice, except where REMIT or the Enforcement Regulations require otherwise. The Procedural Guidelines set out the criteria for opening an investigation into a breach of a REMIT requirement, the investigation process and the sanctions available to Ofgem, which include seeking injunctions, the temporary prohibition of professional activity, freezing assets, a financial penalty or statement of failure to comply, and restitution orders. Warning and decision notices may be published.
The Penalties Statement sets out the criteria that Ofgem will consider in deciding to impose a financial penalty and determining the appropriate level of any such penalty. Criteria include whether a breach of a REMIT requirement damaged, or could have damaged, the interests of consumers or other market participants; whether it had, or could have had, an impact on the orderliness of and confidence in wholesale energy markets; and whether the person on whom the penalty is imposed is an individual. No indication is given of the likely amount of financial penalties.
The full text of the consultation can be found here. Responses to the consultation are due by 29 August 2013. The penalties statement and procedural guidelines are expected to be finalised in October 2013.