The second brick of the European REMIT regulation came into force. This new regulation aims to ensure the transparency and integrity of the wholesale electricity and gas markets throughout Europe. It also creates market surveillance and cooperation between the different national regulators.
REMIT is part of the move to tighten financial market regulation following the 2008 crisis and focuses on wholesale energy markets. European regulation is made necessary by the influence of the wholesale energy markets, their interdependence and the will to eventually create a single market for the European plate.
REMIT has been built up in several steps: First of all, in 2011 the REMIT regulation came into force bringing with it transparency obligations for market players. Then, from 2011 to the end of 2014, the different European authorities worked on the creation of the REMIT implementation acts which came into force on 7 January.
Some of the obligations linked to REMIT have been in force for several years now
One of the outcomes of the first wave of provisions was the creation of a European Agency for the Coordination of National Energy Regulators (ACER). This agency monitors the markets, warns the national regulatory agencies (ARN – in France this agency is the Commission de régulation de l’énergie or CRE) of suspicious behaviour and coordinates them during cross-border investigations. Member states are obliged to give their NRAs powers of investigation and sanction on wholesale energy markets.
Market players, for their part, have an obligation to publish the basic data concerning them immediately. For example, the planned or unplanned unavailability of a production plant or a gas terminal is a fundamental fact. Energy companies cannot act on the markets prior to the release of this internal information. They can declare this data on a dedicated platform of an NRA, a market place or on their website directly. The Directive also defines and re-enacts prohibitions on market manipulation and insider energy trading on wholesale energy markets. In addition, a person acting on these markets has the obligation to notify his NRA and ACER if he suspects market manipulation. Finally, in order to avoid a lone wolf phenomenon, companies must take steps to detect market manipulation and insider power and gas trading.
Since 2011, energy specialists have been concerned about the difficulties in applying REMIT
The two areas of concern for energy companies are the increased regulatory support costs for low-margin transactions and the technical feasibility of reporting.
Since the entry into force of REMIT in 2011 they fear the additional workload that the implementation acts have brought. In its annual report, RWE, a German energy company, for example, expected a significant increase in reporting and transaction costs for trading on the energy markets. However, market players warned ACER during public consultations prior to the adoption of the implementation acts in 2012. They estimated the compliance time to be between 12 and 24 months provided that the technical specifications are published soon after the law. Some stakeholders also called for the exclusion of non-standardised OTC transactions from mandatory reporting, arguing that such tailor-made transactions are by nature incompatible with a standard reporting procedure.