New REMIT developments (financial regulations)

24-09-2014

In 2011, the European Commission passed the REMIT regulation, to prohibit insider trading between market parties and/or manipulation of the market. REMIT stands for Regulation on wholesale Energy Market Integrity and Transparency. So-called national (energy) regulators will control the implementation of this regulation and have united in ACER (Agency for Energy Regulators). ACM, the Dutch regulator, is also a member of ACER. According to the regulation, all inside information has to be made public. The ban on market manipulation has been further specified in the so-called Implementing Acts, which give the rules market parties have to conform to. The expectation is that the European Commission will adopt the definitive Implementing Acts at the end of September. This article describes what the implementation will mean for the market parties, such as GasTerra customers.

Reporting obligation for buying and selling parties

Under the current REMIT regulation, market parties are required to divulge information about the energy contracts they have entered into (via exchanges, brokers or directly). This requirement applies to both buying and selling parties. The Implementation Acts further explain which contracts the regulation applies to, how and when reports should be drawn up and by who. ACER will compile all this information on contracts, orders and deals in a central database. It will then analyse the details to look for signs of possible market manipulation. The systematic compilation of market information should discourage parties to manipulate trade. Market parties are required to report on three types of contracts:

1. Standard contracts for the supply of gas or electricity.
2. Non-standard contracts for the supply of gas and electricity.
3. Contracts for the transport of gas and electricity.

1. Standard contracts

Standard contracts are contracts that are traded on organized market places, such as the TTF, via brokers and exchanges. It does not matter whether an order placed also eventually leads to a deal; Parties must also report when they place an order. ACER has developed a template to make reporting easier. The intention is not that market parties report to ACER directly. They can use the brokers and exchanges or report via a so-called Trade Repository (see http://www.afm.nl/nl/professionals/regelgeving/europees/emir/rapp-trade-repositories.aspx for more information about trade repositories)The market party itself remains responsible for the internal processes, to guarantee the correctness, timeliness and completeness of the report.

ACER aims to implement the requirement of standard contract reporting from the end of May 2015. This time frame depends on when the Implementing Acts are finalized. From that moment on, market parties are required to notify ACER of deals closed and orders placed on a daily basis. Deals closed before that date, but still applicable after May, should also be reported. Parties have three months to do so, starting from the end of May.
 

2. Non-standard contracts

Non-standard contracts are all contracts for the supply of gas and electricity between two parties which have not been realized on the organized market place, such as the regular supply contracts between GasTerra and industrial customers. These contracts do require a certain minimum volume. Did the end-user sign a contract for the supply of less than 600 GWh/year (~61 million m3/year)? In that case, the end-user does not fall under the reporting obligation. According to ACER, contracts with end-users below the threshold of 600 GWh/year do not form a risk with regard to market manipulation.

Because non-standard contracts are realized outside an organized marketplace, the market parties have to report these contracts to ACER themselves. They can use the standard template, as long as the volume to be supplied and the price for that volume is known. If this is not the case, the non-standard template is used for reporting. Market parties can transfer the reporting obligation to the other party after closing the contract.
Reporting non-standard contracts is planned to start late November 2015. Market parties entering into contracts after November, should notify ACER within 30 days. Contracts that were signed earlier, but that are still applicable after November 2015, must still be reported within three months of the start of the reporting requirement for non-standard contracts.
 

3. Contracts for the transport of gas and electricity

Energy products that have to do with the transport of gas and electricity can be subdivided into:

- Contracts relating to primary capacity allocation, and
- Contracts relating to the allocation of transport capacity on secondary markets, including resale and transfer of these contracts.

Market parties do not need to report on contracts for primary capacity allocation; this responsibility lies with the TSOs. However, from the end of November 2015, market parties will be responsible for the reporting of trade in secondary transport capacity. ACER has developed a separate template for these contracts.
 

Other stipulations

Finally, the regulation contains stipulations for the reporting of so-called fundamental data. These stipulations require market parties to divulge information about the fill rate and the use of storage facilities or LNG installations.

In conclusion

We expect that the European Commission will decide on these Implementing Acts in late September. We will keep you informed via the newsletter and the website.
For more information, visit the ACER website: http://www.acer.europa.eu/remit/Pages/default.aspx.