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In focus - Energy prices and transparency for consumers

Market Transparency and Surveillance

Introduction

Source: colourbox.de

© colourbox.de

The Federal Government is focused on protecting consumers:

Market transparency units are being set up at the Federal Network Agency and Federal Cartel Office to encourage competition in wholesale energy and fuel markets. These units will serve to more effectively prevent, detect and prosecute illegal activity.

In addition, the EU Regulation on Wholesale Energy Market Integrity and Transparency (REMIT) combats insider trading and market manipulation in wholesale energy markets. It contains sweeping provisions on market surveillance and imposes wide-ranging data reporting obligations.

Market Transparency Unit for Electricity and Gas

The Act to Establish a Market Transparency Unit for Wholesale Electricity and Gas Trading of 12 December 2012 (Market Transparency Unit Act) requires the establishment of a market transparency unit for wholesale electricity and gas trading (MTU Electricity and Gas) at the Federal Network Agency. This was done by amending the Act against Restraints of Competition (GWB) and the Energy Industry Act (EnWG). The MTU Electricity and Gas is covered by the provisions laid out in the new Ninth Chapter of the GWB (Sections 47a - 47i and 47l) as well as Section 81. The MTU Electricity and Gas is also designated in the law as the national market surveillance authority under REMIT (Regulation on Wholesale Energy Market Integrity and Transparency) pursuant to Section 47b subsection 2 GWB and Section 56 sentence 1 no. 4 EnWG.

The Federal Network Agency will perform the functions of the MTU Electricity and Gas by agreement with the Federal Cartel Office. This relationship will be defined in greater detail in a cooperation agreement concluded between the Federal Network Agency and the Federal Cartel Office and approved by the Federal Ministry for Economic Affairs and Energy. The ministry will also issue a regulation detailing the data collection by the MTU Electricity and Gas.

The MTU Electricity and Gas is tasked with continuously monitoring wholesale marketing and trading of electricity and natural gas. This includes observing power generation and power station dispatch. Its mission is to ensure that wholesale prices are set transparently and competitively. Centralised, ongoing market observation by a government agency is expected to improve efficiency, provide missing information for regulators, and inspire confidence in the integrity of the markets and in the ability of wholesale market competition to benefit consumers.

The MTU Electricity and Gas achieves its mission by constantly and extensively capturing, collecting and analysing all relevant data and information. It is integrated in the REMIT market surveillance regime, and so avoids the need for redundant reporting. Since the MTU Electricity and Gas captures interactions between financial and commodity markets, regulators can promptly investigate reports of legal violations and prosecute offenses. Ongoing market surveillance helps to deter price manipulation as well.

Market Transparency Unit for Fuels

The Market Transparency Unit for Fuels (MTU Fuels), which is part of the Federal Cartel Office, continuously tracks fuel prices at filling stations. Its data collection efforts help identify antitrust violations such as "margin squeeze". Margin squeeze occurs when large oil companies sell fuel to consumers more cheaply than to small and mid-sized filling stations. The MTU Fuels shares its price data with private providers of consumer information services. This kind of open, transparent consumer information is essential for healthy competition and well-functioning markets. The Federal Government does not believe in imposing rules on pricing behaviour. It is far better, after all, to educate mature, responsible consumers than to regulate prices.

The Market Transparency Unit Act authorises the Ministry for Economic Affairs and Energy to issue a regulation enabling the MTU Fuels to carry out its mission at the Federal Cartel Office. The regulation, which went into effect on 29 March 2013, lays out reporting obligations for public filling station operators: every change in retail fuel prices must be electronically reported to the MTU Fuels within five minutes. The information can be downloaded by providers of consumer information services who have been duly authorised by the MTU Fuels as long as they consistently publish the latest prices on a nationwide information service. The providers of consumer information services must appoint an ombudsman to whom consumers can report inaccurate information.

As of 31 August 2013, companies who operate or set the prices at public filling stations must report all price changes to the MTU Fuels. The unit started day-to-day operations on 1 December 2013 after a three-month test run. The first progress report for the Market Transparency Unit for Fuels was published by the Federal Cartel Office after one year of operation.

Visit the Federal Cartel Office website for more information about the MTU Fuels and a list of authorised consumer information services who publish the price data.

Regulation (EU) No. 1227/2011 on Wholesale Energy Market Integrity and Transparency, or REMIT for short, combats insider trading and market manipulation in wholesale energy markets. It took effect on 28 December 2011.

REMIT prohibits insider trading and the abuse of market power. It also contains sweeping provisions on market surveillance and imposes wide-ranging data reporting obligations. The Federal Network Agency, being the national regulator, is responsible for enforcing these prohibitions and the obligation to disclose inside information under REMIT. The agency's responsibility is laid out in Section 56, sentence 1, No. 4 of the Energy Industry Act (EnWG). The EnWG regulates the Federal Network Agency's enforcement and supervisory authority and imposes criminal and administrative penalties for REMIT violations.

As a regulation, REMIT is immediately and directly applicable in all EU member states. All its provisions will not take effect, though, until the European Commission adopts implementing acts. The acts cover the type, scope, format and timing of required reports on trade information and fundamental data in wholesale energy trading. Implementation deadlines start running once the acts are adopted. Participants in the wholesale gas and electricity markets will then have to register. The Federal Network Agency plans to set up a registration portal for all market participants based in Germany.

REMIT's prohibition on insider trading, obligation to publish inside information and ban on market manipulation are already in effect; they do not require the implementing acts to be adopted. More information and exceptions to these rules are available here (only in German).

Additional information on REMIT is available from the European Agency for the Cooperation of Energy Regulators (ACER). For example, the ACER website contains a user guide (PDF: 2.4 MB) on publishing inside information as well as an extensive Q&A catalogue (from November 2013).

Market surveillance, as required by REMIT, will be performed by the market transparency unit being set up at the Federal Network Agency. Its establishment is set out in the Act to Establish a Market Transparency Unit for Electricity and Gas Wholesale Trading (Market Transparency Unit Act) that took effect on 12 December 2012. The Market Transparency Unit Act amends the Act against Restraints of Competition (GWB) by adding national regulations on the market observation duties of the Market Transparency Unit for Electricity and Gas Wholesale Trading.