REMIT also known as Regulation (EU) No 1227/2011 of the European Parliament and of the Council of 25 October 2011 on wholesale energy market integrity and transparency entered into force on 28th of December 2011. It is an important element of Community policy in relation to the constant growth of interlinking between electricity and gas markets in the European Union and the need to cross-border monitoring of market participants activities on those markets.
WHAT IS REMIT
Main aim of REMIT is to ensure the integrity and transparency of European wholesale energy and gas markets especially through monitoring of market participants trading activities on those markets. Increased integrity and transparency of wholesale energy and gas markets may be assured through the stimulation of open and fair competition in those markets, which will provide increased confidence to(in) those markets and ensure that that prices set on those markets reflect a fair and competitive interplay between supply and demand. One of REMIT’s goals is also to assure that no profits can be drawn from market abuse activities and that final customers interests are promptly protected especially affordable energy prices for these customers are guaranteed.
SCOPE OF REGULATION
REMIT applies to participants of wholesale energy and gas markets who enter into transactions related to wholesale energy products. In accordance with definitions included in REMIT, the following contracts and derivatives are considered as “wholesale energy products”:
- contracts for the supply of electricity or natural gas where delivery is in the Union;
- derivatives relating to electricity or natural gas produced, traded or delivered in the Union;
- contracts relating to the transportation of electricity or natural gas in the Union;
- derivatives relating to the transportation of electricity or natural gas in the Union.
Contracts for the supply and distribution of electricity or natural gas for the use of final customers with a consumption capacity of 600 GWh per year or lower are not considered as wholesale energy products. Consumption capacity means the consumption of a final customer of either electricity or natural gas at full use of that customer’s production capacity.
In addition articles 3 (prohibition of insider trading) and 5 (prohibition of manipulation) of REMIT shall not apply to wholesale energy products which are financial instruments – in case of these wholesale energy product appropriate financial markets regulations shall apply especially Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation).
OBLIGATIONS ARISING FROM REMIT
REMIT introduces five key obligations/prohibitions:
- obligation to publish inside information i.e. information of a precise nature, which has not been made public which relates to one or more wholesale energy products and which, if it were made public, would be likely to significantly affect the prices of those wholesale energy products (especially information about operational matters of generation units that are owned or controlled by market participant);
- prohibition of insider trading which relates to persons who possess such information before it is made public, these persons shall be prohibited from: using such information by acquiring or disposing of (or by trying to acquire or dispose of) wholesale energy products to which that information relates, disclosing such information to any other person and from recommending or inducing another person, on the basis of such information to acquire or dispose of wholesale energy products to which such information relates;
- prohibition of market manipulation i.e. prohibition of any engagement in or attempt to engage in market manipulation on wholesale energy markets which means prohibition of entering into transactions that give or are likely to give false or misleading signals as to the supply of, demand for or price of wholesale energy products (especially any mechanism, collaboration or fictitious device which secure or attempt to secure the price of one or several wholesale energy products at an artificial level);
- obligation to register as a participant of wholesale energy market with the national regulatory authority in the Member State in which market participant is established (or active), the registration is made via CEREMP (Centralised European Register of Energy Market Participants) and is crucial to fulfill the undermentioned obligation to report;
- obligation to report i.e. to provide the Agency (ACER – Agency for the Cooperation of Energy Regulators) with a record of wholesale energy market transactions, including orders to trade; the information reported shall include the precise identification of the wholesale energy products bought and sold, the price and quantity agreed, the dates and times of execution, the parties to the transaction and the beneficiaries of the transaction and any other relevant information); such information enables the Agency’s monitoring of market participant activities on European wholesale energy markets.
Obligation to publish inside information, prohibition of insider trading and prohibition of market manipulation came into force on the day on which REMIT entered into force i.e. on 28th of December 2011. Obligation to register and to report information related to transactions concluded and orders placed applies with effect from 7th of October 2015 when it comes to transactions concluded and orders placed on organized market places and form 7th of April 2016 when it comes to other transactions and orders.
According to REMIT it is Member States obligation to lay down the rules on penalties applicable to infringements of REMIT and take all measures necessary to ensure that they are implemented. The penalties provided for must be effective, dissuasive and proportionate, but the decision about its exact type and scope remains with each Member State. REMIT establishes only a general obligation for persons professionally arranging transactions in wholesale energy products to notify possible breaches of article 3 or 5 of the Regulation the national regulatory authority without further delay.