Wholesale electricity and gas markets — EU oversight rules

SUMMARY OF:

Regulation (EU) No 1227/2011 — wholesale energy market integrity and transparency

SUMMARY

WHAT DOES THIS REGULATION DO?

It establishes a framework for monitoring wholesale energy markets*. It aims to prohibit abuses such as insider trading* and market manipulation*.

KEY POINTS

The regulation strengthens the role of the Agency for the Cooperation of Energy Regulators (ACER). ACER’s tasks include the following.

Monitoring trading activities in the wholesale energy market. This is done by establishing a European register of market participants on the basis of information provided by national authorities.

Sending an annual activity report to the European Commission. This may include:

recommendations on how to better implement market rules to improve transparency and integrity;

an evaluation of whether minimum requirements for organised markets could increase transparency.

Market manipulation

By creating ACER, the regulation seeks to prevent instances of market manipulation such as the following.

Placing false orders.

Spreading false information.

Giving false information to those who provide price assessments or market reports, thus misleading market participants who act on the basis of such information.

Claiming a different available amount of electricity generation capacity*, transmission capacity* and natural gas to that which actually exists. This has the potential to affect electricity and gas price levels.

Participants

Market participants have to:

register with a national regulatory authority (NRA);

provide ACER and the NRA with information so both bodies can monitor trading activities;

publicly disclose inside information* in a timely manner, including that related to the capacity and utilisation of facilities, production, storage, consumption and transmission of electricity, natural gas or liquefied natural gas (LNG).

Penalties

EU countries must enforce penalties in the event of non-compliance with this regulation. These have to be proportionate and reflect:

the seriousness of the infringement;

the damage caused to consumers;

the potential trading gains from acting on inside information* and market manipulation.

KEY TERMS

* Wholesale energy markets: these are markets where energy is traded between energy retailers (such as electricity companies), investment banks and large energy users (for example, steel plants).

* Insider trading: when an individual attempts to benefit from trade in a certain product based on information that is not yet public (inside information). Without this information, other traders are at a disadvantage.

* Market manipulation: deliberately interfering with the fair operation of a market. This can involve creating false or misleading signals regarding the supply or demand of a certain product, thus affecting its price.

* Electricity generation capacity: the capacity to produce electrical energy.

* Transmission capacity: the capacity of fixed infrastructure, such as power lines, to transport electricity.

* Inside information: information related to a product which has not been made public. If it were to be made public, this could affect the price of the product in question.

BACKGROUND

Agency for the Cooperation of Energy Regulators

WHEN DOES THE REGULATION APPLY?

From 28 December 2011.

ACT

Regulation (EU) No 1227/2011 of the European Parliament and of the Council of 25 October 2011 on wholesale energy market integrity and transparency (OJ L 326, 8.12.2011, pp. 1-16)

last update 26.10.2015