Legal basis of REMIT
A brief introduction
The European Parliament and the Council of European Union adopted on 25 October 2011 the Regulation (EU) No 1227/2011 on wholesale energy market integrity and transparency, so called REMIT.
REMIT stands for Regulation of Energy Market Integrity and Transparency.
In 2014, the European Commission having regard to the Treaty on the Functioning of the European Union, to the Regulation (EU) No 1227/2011 of the European Parliament and of the Council of 25 October 2011 on wholesale energy market integrity and transparency (REMIT), and in particular Article 8(2) and Article 8(6) from REMIT, adopted the implementing Regulation (EU) No 1348/2014 on data reporting implementing Article 8(2) and Article 8(6) of REMIT.
The European Commission empowered the Agency for the Cooperation of Energy Regulators (ACER) to carry out the REMIT implementation and monitoring of the wholesale energy market in Europe.
ACER was established based on Regulation (EC) No 713/2009 of the European Parliament and of the Council of 13 July 2009. The Regulation (EC) No 713/2009 describes the establishment and legal status, tasks, organisation and financial provisions regarding ACER.
For the implementation of REMIT, it is known that ACER constantly updates a series of documents, among which we specify the following ones:
MOP (Manual of Procedures on transaction and fundamental data reporting);
TRUM (Transaction Reporting User Manual);
RRM (Requirements for the registration of Registered Reporting Mechanisms);
Q&A, FAQ, REMIT Quarterly reports;
Lists of standard contracts (contracts admitted to trading at organised market places);
Lists of Organized Market Places;
PPAT term and others.
In the monitoring of European energy market, REMIT and its implementing act represent the tool for the EU to achieve its economic and social goals and to have a better control on energy prices.
World’s population is growing fast and, with it, the consumption of energy and resources.
The European energy markets are changing continuously. The European Union is still in process of leveling the reluctant markets as some member states are still facing challenges when it comes to policy implementation.
Technology and energy, now more than ever, are interdependent and those who are not keeping up with the new changes will leave behind them a gap, making some parts of Europe vulnerable.
Starting with 2011 when REMIT has been adopted by the European Parliament, a new sector was established, meaning the monitoring sector of the European energy market, which includes the monitoring of wholesale energy prices, fundamental data, nomination and allocation of capacity and many others.
In the same time, REMIT introduces a legal framework for identifying and penalising insider trading and market manipulation in wholesale energy markets across Europe.
In this context, the largest database of European energy market was born as the ARIS system collects daily more than 45 mil data (according to the latest REMIT report of ACER).
Considering the fact that the European Union’s target is to increase the integrity and transparency of the wholesale energy market using a range of energy resources and innovative technologies, we realize the benefits of monitoring the market and the great efforts of ACER and the European Commission.
Nevertheless, one shall take into consideration even the new physical and digital risks that imply even greater threats in the energy sector.
We strongly believe that a transparent energy market with clear and well-defined rules implemented in a uniform manner in each member state, followed by an efficient monitoring, as well as a legal framework that encourage investments will end in the decrease of the energy prices and in European citizens’ welfare.
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REMIT importance for the European energy market
As it is mentioned in the REMIT, the most important goal is to have fair and competitive prices on wholesale energy markets in Europe. Another ambitious goal that REMIT sets is to increase the integrity and the transparency of the wholesale energy markets and that prices that are set on wholesale energy markets reflect a fair and competitive interplay between supply and demand, and that no profits can be drawn from market abuse.
Main obligations resulting from REMIT for market participants, National Regulatory Authorities and ACER
According to REMIT, a market participant means any person, including transmission system operators, who enters into transactions, including the placing of orders to trade, in one or more wholesale energy markets.
Starting from the above cited definition we understand that REMIT has a wide scope of application and the European energy market entered in a new phase of its evolution. The goal of EU, to have fair prices on energy, and the results of this goal are expected by every citizen of European Union, taking into account that we have REMIT Regulation in force and that the Agency for the Cooperation of Energy Regulators is responsible for monitoring and collecting the data from the wholesale energy markets.
Until we have precise data on these results, we can say with certainty which are the main obligations and the deadline for compliance.
Therefore, starting from 7 October 2015 OMP and ENTSOs have the obligation to report to the ARIS system the following:
OMPs – have the obligation to report data from the records of transactions in wholesale energy contracts, including orders to trade, admitted to trading at organised market places (OMP) and
The ENTSOs have the obligation to report fundamental data from their central information transparency platforms
Starting from 7 April 2016, market participants, TSOs, LSOs and SSOs, have the obligation to report to the ARIS system, data resulting from Over-The-Counter, standard and non-standard supply contracts and transportation contracts from market participants, as well as reportable fundamental data from Transmission System Operators (TSO), LNG System Operators (LSO) and Storage System Operators (SSO).
Not for least, starting from 1 January 2017 market participants need to comply with the obligation to disclose inside information on their website or other service providers and to enable the web feeds so Agency can collect the data efficiently. On ACER website a document with common minimum standard may be found in order to ensure fair, effective and transparent reporting of inside information.
Several obligations result from the REMIT and its implementing act. It is worthy to mention that EU Member States have the obligation to ensure that their National Regulatory Authorities have the required investigatory and enforcement powers to accomplish this.
The National Regulatory Authorities play a key role in ensuring the integrity and the transparency in the European wholesale energy market.
In the same time an important role is granted to ACER by the fact it collects information from market participants (more than 45 mil of data/day according to ACER), monitor, analyze the received data through ARIS system and assure their security.
More information on this subject may be found on our website at the REMIT Portal section.
ACER’s role in the implementation of REMIT
REMIT plays an important role in the completion of a well-functioning internal energy market in the European Union. Well-functioning markets should work on the basis of reliable price signals, namely price signals which reflect the demand and supply fundamentals and are not distorted by abusive market behavior. Security of supply also benefits from well-functioning markets.
One of ACER’s major role of is to collect data from wholesale energy market participants, analyze those data and to monitor wholesale energy market participants according to Article 8(2) and Article 8(6) of Regulation (EU) No 1227/2011 of the European Parliament and of the Council on wholesale energy market integrity and transparency.
REMIT was enacted by the European Parliament and the European Commission adopted its implementing legal framework, meaning Regulation (EU) No 1348/2014 on 17 December 2014. The implementing regulation granted ACER important roles and responsibilities in order to assure the transparency and the integrity of the European wholesale energy market.
European citizens are eager to find out the results of ACER’s monitoring activity on energy market. Especially in ACER’s reports which should be more detailed in this respect.
Collecting data process through ARIS
ARIS (ACER REMIT Information System) is ACER’s software surveillance system used to collect and share data (including fundamental data) with national European energy regulators and other authorities among which national competition authorities. ARIS is also used to monitor trading activities in wholesale energy products with the aim to detect and deter market abuse in forms of insider trading and market manipulation, including attempted market manipulation.
According to Mr. Tony Sio, the head of SMARTS Market Surveillance at Nasdaq, ACER uses market surveillance software SMARTS to monitor trading for suspicious behavior. The same source states that SMARTS was developed in Australia, then acquired by the U.S. Nasdaq Inc. (NDAQ.O) and now it is used to monitor trading in Nordic power derivatives.
Some industry sources say that the software used by ACER will have trouble pinpointing transgressions, partly because many of the traded power contracts overlap (not complete information), for example, the price of a quarterly power contract could be moved by trading in monthly contracts, and those can be broken up into weekly contracts, making it more difficult to trace manipulation through trades. The question is how will ACER interpret this behavior? Will it drown them in false alarms? We are sure that the answer will be found in ACER documentation.
ACER focuses in the collecting data process on capacity, volume and price.
Future reports from ACER are eagerly expected, hopefully with much more details, presenting the actions it has taken.
EEU Recommendations for ACER
Taking into consideration the importance of REMIT, the sensitive subjects that were analyzed, as the energy market manipulation, after a deep analysis, EEU comes with the following recommendations for ACER:
It is known that for the time being, ACER has a certain approach when it comes to answer the questions it receives regarding the interpretation of REMIT, the implementing act, transactions and other matters. More exactly, ACER declared that for the questions they have already provided an answer, they will not reply once more, as the answer should be searched in FAQ, Q&A and other public documents.
Considering this approach, EEU recommends ACER to reconsider this procedure and to reply to all the emails received via Service Desk, providing at least the reference where the answer to an already answered question can be found.
Clarity in the REMIT and its implementing act is absolutely mandatory if ACER has a key priority in receiving high qualitative data from market participants. The ambiguity in interpretation may be prevented simply by providing an answer with the reference to the already answered question.
The same is valid for other communication and interaction between market participants and the Service Desk. Therefore, it would be extremely useful:
If a market participant sends a questions he will be informed about the status of his question, unless a T1 or T2 has been assigned to the question;
If any request has a precise answer – as a reference, indication, even if the answer has already been provided by ACER or CSD (Service Desk);
It will be useful for market participants to receive via ACER reports or other documents, more information about the investigation cases opened by ACER on market manipulation and abuse cases (only information that are not confidential).
This information can be helpful for market participants to understand better the concept of market manipulation, which constitute a market abuse.