Energy traders need clarity on enforcement of REMIT

The energy market faces uncertainty over the enforcement of new transparency rules which come into force next month, OpenLink has warned.

The trading software firm said there is a lack of clarity over how lenient Ofgem will be when the second round of Regulation on Wholesale Energy Market Integrity and Transparency (REMIT) data reporting rules are introduced on April 7. 

The first tranche was introduced by the EU last October. It required energy market traders to submit data to the European Agency for the Cooperation of Energy Regulators (ACER) on their exchange-based trades. 

The second tranche will require traders to also submit data on over-the-counter (OTC) trades – bilateral transactions which take place outside of exchanges. ACER will collect the data, and Ofgem will enforce the rules.

External consultant to OpenLink Aviv Handler told Utility Week it is not clear how quickly enforcement will begin: “Who can say whether somebody who fails to report would be sanctioned by the regulator on day one?”

Handler also called on ACER not to leave any further updates on how to report data to the last minute. The agency said although it does provide regular updates, it won’t change any of the rules before April 7 “in order to smoothen the reporting process for the stakeholders”.

Harry Nota, OpenLink’s head of energy for Europe, the Middle East and Asia, said the first round of REMIT rules were relatively easy to comply with because “all that data sat with the exchanges, the brokers”, who were therefore able to offer reporting services.

However, for OTC transactions the data is held by the traders themselves. “They now have to go and find this information; put it into formats that are structured and provided by the regulator; and find mechanisms to send that information on a daily basis”, he added.  

Nota said such contracts often contain “very complex pricing”, and that “to decompose those contracts … is not a trivial task.” He warned that traders will not only have to collect and submit the data but monitor it as well, so they can justify transactions and prove they are all above board.

A spokesperson for Ofgem told Utility Week: “Reporting of wholesale energy contract information is important for improving transparency and confidence in the GB wholesale markets. Market participants have a responsibility to comply with the rules coming in next month. 

“If we find anyone is in breach of REMIT requirements we will carefully consider the individual circumstances. As set out in our REMIT procedural guidelines, before exercising any powers, we will have regard to the need to be proportionate and to use our resources in an efficient way.”