Prices in energy wholesale markets are a key factor affecting retail prices for household consumers and industrial users. More than in other sectors, energy market prices are highly sensitive to the availability of production and transmission capacities. This is due to the fact that electricity cannot be stored on an industrial scale. It is for this reasons that prices can be influenced easily by creating a false impression about the availability of capacities or indeed by reducing actual production.
Europe's wholesale energy markets are also increasingly cross-border in nature. Price setting is not tied to single countries. It occurs through the interaction of supply and demand across national boundaries. Electricity prices in The Netherlands, for example, will be strongly influenced by the availability and cost of electricity generation in Germany or the change in demand in France. Wholesale markets are also cross-platform. Transactions are frequently concluded outside the country of origin. While all this is beneficial for market integration, it opens the way for market abuses transcending national oundaries. In order to effectively detect and deter such behaviour, different national markets have to be looked at together.
It is crucial to ensure the presence of EU-level comprehensive rules which guarantee that citizens can be confident that prices are set fairly and the citizens can fully benefit from the internal energy market.
The new rules aim at ensuring that traders cannot use inside information to benefit from their transactions or manipulate the market by artificially inflating prices than would be justified by the availability, production cost or capacity to store or transport energy.
In particular, the rules prohibit the following:
- use of inside information when selling or buying in wholesale energy markets. Exclusive and price-sensitive information should be disclosed before trades can take place
- transactions that give false or misleading signals about the supply, demand or prices of wholesale energy market products
- disseminating inaccurate news or spreading rumours that give misleading signals about these products.
Market monitoring to uncover possible cases of abuse is the responsibility of the European Agency for the Cooperation of Energy Regulators (ACER). The Agency must have timely access to all the information on the transactions taking place in wholesale energy markets. This includes information on the price, the quantity sold and the counterparties involved. The data will also be shared with national regulators, which will also be responsible for detailed investigation of suspected abuse. In complex cross-border cases, the ACER will coordinate investigations
Penalties will be enforced by national regulatory authorities in Member States.
The specific legislation is necessary in order to ensure that one body can monitor the entire wholesale market for energy, whether it concerns the derivative market or the spot market. The Directive on Insider Dealing and Market Abuse (MAD) and the Markets in Financial Instruments Directive (MiFID) which relate to financial instruments cover only derivative markets and transactions.