On 15 March 2013, the Office of Gas and Electricity Markets (Ofgem) published an open letter on Regulation 1227/2011 on wholesale energy market integrity and transparency (REMIT), which aims to counter insider trading and market manipulation and to increase transparency in the wholesale markets for electricity and natural gas.
REMIT came into force on 28 December 2011. As a European regulation, REMIT is directly applicable in the UK. However, certain obligations are required to be detailed by the European Commission (the Commission) through implementing acts to complete implementation (the Implementing Acts). The letter seeks views from wholesale energy market participants and other wholesale energy market stakeholders on issues relating to the Implementing Acts.
According to ACER’s REMIT microsite, the Implementing Acts are not expected to be adopted before “mid-2013” at the earliest. ACER’s timeline sets the overall timeframe out in more detail.
The scope of the letter published by Ofgem and the aspects of REMIT implementation on which Ofgem is seeking views are as follows:
Implementation of prohibitions against market abuse (Article 13)
Member States must ensure, by June 2013, that their National Regulatory Authority (NRA) has the necessary investigatory and enforcement powers to fulfil their functions under REMIT. The UK Government is in the process of granting such powers to Ofgem, the UK NRA. These powers are expected to be finalised in Q2 2013.
Ofgem will consult on its REMIT penalty policy and enforcement procedures whilst the draft investigatory and enforcement powers are being considered by Parliament. Stakeholders should keep up to date with any draft secondary legislation relating to these powers and consider submitting responses to the proposals.
Data collection (Article 8)
The European Commission (EC) is expected to adopt Implementing Acts later this year which will set out details of the transaction data that market participants will be required to report to the Agency for the Cooperation of Energy Regulators (ACER).
The draft Implementing Acts are expected to be released for public consultation shortly and data collection is expected to begin 6 months after the EC Implementing Acts come into force.
Registration of market participants (Article 9)
Market participants who enter into transactions in wholesale energy products (as defined in REMIT) must register with the NRA of the Member State that they are established or resident in. In relation to UK resident or established entities, the NRA is Ofgem as mentioned above. If a market participant is not established or resident but are active in an EU Member State, they must register in an EU Member State.
In order to submit transaction data, market participants (see further below) will be required to be registered first and the registration process is expected to begin within 3 months after the implementing acts are adopted by the EC. ACER is expected to publish a draft of the relevant Implementing Acts which will set out the detail of the registration process for both reporting mechanisms and market participants.
In the second edition of its REMIT Q&A at paragraph 3.4, ACER sets out a list of the persons it considers to fall within the REMIT definition of a “market participant” (Article 2(7)). This list includes, amongst others, energy trading companies.
Transaction reporting under Article 9 will commence 6 months after the implementing acts setting out the details to be reported are adopted. To register, market participants must submit a registration form to their NRA before entering into a transaction that is reportable to ACER. This means that UK market participants will need to submit their registration form to Ofgem in advance of the relevant Implementing Act being adopted.
In its letter, Ofgem notes that it is working with ACER to develop a "registration user manual" which will include guidance on how to use the registration system as well as an explanation of the fields that market participants will need to fill in. Ofgem asks for views on any specific issues that stakeholders think the user manual should address and also seeks views on what registration data should be made public by ACER.
Transparency (Article 4)
Article 4 of REMIT requires market participants to publically disclose, in an effective and timely manner, “inside information” (as defined in Article 2(1)) that they possess in respect of certain business facilities. There has been much discussion across the energy industry as to what “effective” and “timely” disclosure means in practice and in the second edition of ACER’s REMIT Q&A, a little light has been shed on this. In summary, ACER suggests that inside information should be disclosed as widely as possible and considers the use of “transparency platforms” as being likely to be the most effective means of disclosure.
In its letter, Ofgem asks certain questions relating to transparency platforms and their use. In particular it asks about the benefits of moving towards the use of transparency platforms (whether at EU level, regional or national level), whether there are any differences for gas and electricity markets, what are considered to be the characteristics of an effective transparency platform, and what is considered to be the appropriate local gas market threshold for inside information disclosure. Responses are invited by 1 May 2013.