According to the revealed contributions to the consultation on the enhanced transparency regime for the wholesale energy markets the German utilities RWE and EnBW share the view that generation and consumption units need to be treated the same.
RWE and EnBW differ, however, in whether the aggregate or unit-by-unit data should be published.
As it seems, it is the EdF that reaches one of the core problems, which is the need that the transparency regime should not require divulging the commercial and hedging strategies of market players, which remain strictly confidential.
As was mentioned in the post ‘Provisions on companies affiliations added to REMIT by the European Parliament on 14 September 2011’ on 16 September 2011 lapsed the time-limit for submitting responses in a public consultation on fundamental electricity data transparency. Released document ‘Public Consultation Document Guidelines On Fundamental Electricity Data Transparency’ referred to the ERGEG Advice Comitology Guidelines on Fundamental Electricity Data Transparency Ref: E10-ENM-27-03 of 7 December 2010. The said consultation as well as ERGEG advice are closely related to REMIT and constitute the input to the future implementing acts of the Commission.
As I have signalled in the above-mentioned post, in the consultation document the European Commission posed interesting issues, among others:
‘Points 4.3.2.4 and 4.3.2.5 of ERGEG's guideline require publishing ex-ante information on planned and ex-post information on the unplanned unavailability of generation units including the name of the generation units, location, bidding area, available capacity during the event, installed capacity, etc. Do you consider that publishing this information on a unit-by-unit base would be likely to create any competition concerns? If yes, how does this concern relate to the potential benefit this information yields to market participants? Could this concern be remedied in a way which would nevertheless enable market participants to properly assess such an important change in a supply fundamental (e.g. by publishing data in aggregated form, for instance per production type and balancing zone)?’
Currently, the contributions have been published on the consultations website http://ec.europa.eu/energy/gas_electricity/consultations/20110916_electricity_en.htm.
It is apparent from the responses of market participants to the public consultation, the issue of whether the names of generation and consumption units or aggregated data should be published, triggered off the major controversy.
The German RWE presented the view that ‘unit-by-unit publication of generation and consumption data is crucial for the largest possible range of market participants to be active. By contrast, aggregated information gives market participants (particularly non incumbents) far less insight as to the market impact of individual events and, therefore, will mean fewer active companies, lower liquidity and less efficiency gain for the market’.
RWE regards unit-by-unit information to fall under the auspices of REMIT and that publication of such data be a legal requirement.
RWE asserts, furthermore, that mere ex-ante aggregated data do not allow market participants to assess the consequences of an outage. They have no indication how long the outage will continue and they are unaware of the unit's location in the network (which is crucial if the network is congested). So the market needs to know:
• the name of the consumption units,
• the location and bidding area,
• the installed capacity,
• available capacity during the event, and
• the expected duration of the outage.
According to the German utility stance these pieces of information are also crucial for the ex-post evaluation. Understanding past events and their resulting impact on prices is an indispensable element of forming a forward view on market developments. In addition to receiving important data in advance, traders therefore also need to understand actual events through analysis of detailed information after the event. An hourly update of the unit-by-unit information is crucial to give market players the required transparency and the amount of total supply.
The RWE views on the necessity of the unit-by-unit publication of generation and consumption data isn’t, however, shared by other utilities also in the German wholesale electricity market. EnBW does not perceive any need to disclose the name of the consumption unit but agree that the information on the unavailability of consumption units can be disclosed anonymously identifying the bidding area, timeframes and unavailable load. According to the EnBW some specific information as name and place of the asset are not relevant for the market and should not be published.
Also Swissgrid Ltd believes that the provision of aggregated consumption data per bidding area is sufficient to provide market actors with information on which to base their market expectations. It believes, moreover, that the provision of detailed information on the consumption units does neither improve traders’ ability to predict market developments nor will it contribute to levelling the playing field for market actors. On the contrary, evaluating and interpreting the detailed information might put smaller players who cannot dedicate a lot of resources to this task at a disadvantage.
The ex-ante information on planned generation, however, should be aggregated per fuel used ((i.e. coal, lignite, gas, nuclear, hydro etc.) since the type of generation can have an impact on prices.
The Swissgrid also does not perceive the benefit of ex-post publishing the details of individual generation units for the market (even though it deems the impact of ex-post publication of the generation data less critical than the ex-ante information).
The view that from a market participant’s perspective the aggregated amount of unavailable capacity in each bidding area is of interest, not the information of a single unit’s unavailability, is also shared by the Oesterreich Energie. The Oesterreich Energie underlines, however, that the definition of “unit” is in any case unclear and needs to be better specified.
RWE and EnBW (differing in the stance on the sufficiency of the aggregated data instead of unit-by-unit publication) are, however, of the same views as regards the necessity of the uniform approach towards the generation and consumption units.
RWE substantiates the need for establishing the principle that generation and consumption are treated the same. It argues that the market has the same interest in knowing the availability of a 100 MW generation unit and a 100 MW consumption unit, because any unexpected outage will have a similar degree of influence on the market. A unit-by-unit publication of energy consumption facility is valuable to the market as it allows market participants to analyse not only the consequences of a facility outage, but also to forecast the consumption for certain industries.
This approach is supported by EnBW which does not perceive any reason why there should be a different treatment of consumption data vis-à-vis generation data. EnBW underlines that it is the combination of supply and demand that is key determinant for the price formation.
RWE emphasises, moreover, that the future guidelines must ensure that large energy consumers will fully comply with the transparency requirements. In particular, the guidelines must make sure that energy consumers do not allocate consumption to a number of smaller units below the threshold in order to evade their transparency obligations.
The French utility EdF, in turn, the main focus of its contribution places on concerns on whether legitimate hedging and optimization activities that support the development of efficient, liquid and effective wholesale markets, are not undermined by the new requirements. EdF stresses, in particular, the current challenge is to carefully design a regulatory framework which, while promoting a high level of transparency requirements, still protects utilities from undue constraints preventing legitimate hedging and optimization activities of their assets in close interaction with their trading entities.
Provide clarity to market participants in respect of the disclosure requirements, should be, according to the EdF, one of the important functions of the REMIT. EDF considers that legal certainty requires that the future regulation makes clear that the compliance with the transparency requirements shields utilities from any further information request from market participants under antitrust rules or REMIT.
In other words, the high level of transparency should go with a consistent protection of the data providers that should not be asked to provide transparency data outside the scope of information definitions of the guidelines. The French utility underlines that while the information mentioned in ERGEG’s advice covers all the information necessary for market participants to anticipate, to the best possible extent, the offer and demand on the electricity wholesale markets, it does not divulge the commercial and hedging strategies of market players, which remain strictly confidential.
The issues, thereon the contribution of the EdF is concentrated, seem really the pivotal problem for the vertically integrated undertaking active on energy markets. These firms comprising transmission, distribution, generation and trading activities face the requirement to build “Chinese walls” between their generation and trading business lines (as was the case already with respect to the transmission and distribution system operators). Data relating to the generation of electricity becomes more and more “sensitive” at least before they are publicised. In what extent such an information - before being publicised - can be utilised in the internal process for working out the commercial and hedging strategies of trading arms of the vertically integrated undertaking – is at the moment not quite clear. What is, in turn, clear, it is that the sphere of regulatory risks these undertakings are facing, extends significantly.
Editorial note: European Commission’s Proposal for a Regulation of the European Parliament and of the Council on energy market integrity and transparency {SEC(2010) 1510} {SEC(2010) 1511} was already the subject of following posts:
1) Draft REMIT Regulation does not cover EUAs – but for how long?
3) The definition of ‘inside information’ under REMIT – dubious without the EC and market input (I);
4) The definition of ‘inside information’ under REMIT – dubious without the EC and market input (II);
6) Provisions on companies affiliations added to REMIT by the European Parliament on 14 September 2011