|REMIT - Records of wholesale energy market transactions|
REMIT Regulation transactions and orders reporting system, along with the implementation of:
- EMIR reporting, and
deserves particular interest and substantial organisational effort to fulfil all respective requirements.
Under REMIT market participants are required to report to the European Agency for the Cooperation of Energy Regulators (ACER or "Agency") details of their transactions and orders in relation to wholesale energy products, including the price, quantity, date and time of trades.
In accordance with Article 8 of REMIT, the following parties must report/provide data in accordance with the implementing acts:
- market participants, which means any person, including transmission system operators, who enters into transactions, including orders to trade, in one or more energy markets,
- third parties acting on behalf of market participants,
- competent authorities which have received data in accordance with Article 25(3) of Directive 2004/39/EC (MiFID) or ESMA when it has received that information in accordance with Regulation (EU) No 648/2012 (EMIR).
Market participants must ensure that the transaction reports they submit are complete and accurate, in accordance with Article 8(1) of REMIT.
As ACER underlines, to achieve this market participants must have appropriate systems and controls in place.
The requirement for market participants to provide complete and accurate transaction reports includes the requirement to:
- submit accurate reports for any transactions,
- correct a previously submitted transaction report that is inaccurate; and
- correct a transaction report when the transaction itself has been amended post trade.
Reporting under REMIT is a massive process - ACER receives this information from 115 Registered Reporting Mechanisms (RRMs), in addition, there are approximately twelve thousand market partcipants who report regularly (REMIT Quarterly, Issue No. 10 / Q3 2017).
During 2018, the ACER collected, on average, 2.4 million records of transactions and orders to trade per day (73 million records per month), which increased to around 3 million records of transactions and orders to trade per day towards the end of the year (Consolidated Annual Activity Report - Year 2018, ACER, 14 June 2019, p. 12).
Legislative path towards REMIT transactions' and orders' reporting
Detailed rules on transactions' and orders' reporting under REMIT and the specific responsibilities' allocation are specified by the European Commission, which is empowered by Article 8(2) and (5) of REMIT to adopt in that regard (following a comitology procedure) an implementing act.
The process for agreeing REMIT implementing rules was prolonged.
Data reporting under REMIT was initially envisioned to start within six months of the adoption by the European Commission of implementing act - effectively in the first half of 2015 (date cited after the ACERs Report on its activities under REMIT in 2013), however the amendments made in the course of the comitology procedure extended these terms to 9 and 15 months (respectively, for the relevant obligations - see Article 12 of the draft Commission Implementing Regulation after the comitology process).
This procedure finally effected in the adoption of the Commission Implementing Regulation No 1348/2014 of 17 December 2014 on data reporting implementing Article 8(2) and Article 8(6) of Regulation (EU) No 1227/2011 of the European Parliament and of the Council on wholesale energy market integrity and transparency (REMIT Implementing Regulation).
REMIT Implementing Regulation empowers ACER to publish and periodically update the TRUM (Trade Reporting User Manual), which serves as a key operational tool for trading in the power and gas products.
The process for fleshing out REMIT Regulation laconic provisions of Article 8 started with ACER's “Recommendations to the Commission as regards the records of wholesale energy market transactions, including orders to trade, according to Article 8 of Regulation (EU) No 1227/2011” of 23 October 2012 (“Recommendations”), which contained the European energy regulator's directions as to the details of the form of records of transactions and orders to trade.
In Recommendations ACER suggested the following should be reported:
- records of transactions and orders to trade in wholesale energy contracts executed or placed at organised market places,
- confirmations of records of standardised transactions and transactions in standardised wholesale energy contracts (including derivatives),
- confirmations of records of transactions in non-standardised energy commodity contracts, and
- scheduling/nomination information.
Additional input was brought by the European Commission’s document Stakeholder Consultation on the Implementation of a Data and Transaction Reporting Framework for Wholesale Energy Markets.
Another portion of ACER's suggestions was contained in "Recommendations to the Commission as regards the records of wholesale energy market transactions, including orders to trade, according to Article 8 of Regulation (EU) No 1227/2011 concerning balancing market and transportation contracts" of 26 March 2013.
See also the document ACER Public Consultation on Recommendations to the European Commission as regards the records of wholesale energy market transactions according to REMIT, Evaluation of Responses, Ref: A12-AMIT-04-07a) of 23 October 2012.
REMIT in the context of financial market reporting
It is noteworthy that reporting under REMIT differs in scope from the one under MiFID or EMIR.
The said divergences flow from different product scope under REMIT and EMIR, with REMIT also covering energy commodity contracts, and the different mandate of ACER and ESMA (the European Secutities and Markets Authority) under REMIT and EMIR, i.e. monitoring of market abuse versus monitoring of systemic risks.
Also instruments covered by the reporting standards differ, REMIT scope (transactions as well as orders to trade) being broader than EMIR (orders to trade not included).
Ensuring a harmonised approach to reporting as much as possible under EMIR and REMIT would be highly advisable.
However, divergent procedural rules applying under REMIT on the one part and under EMIR on the other (implementing acts versus delegated acts), as well as different competences applying to the ACER and to ESMA (recommendations versus draft technical and draft regulatory standards) make this task complicated.
Another aspect of the problem is definitions of energy exchange, broker and market operator under REMIT reporting standard correspond mutatis mutandis to the definitions of regulated market,MTF, systematic internaliser and market operator under Article 4 of MiFID, but are applied to wholesale energy products and market participants instead of financial instruments and investment firms in order to cover the energy commodity market (see: ACER Public Consultation on Recommendations to the European Commission as regards the records of wholesale energy market transactions according to REMIT, Evaluation of Responses, Ref: A12-AMIT-04-07a of 23 October 2012).
Moreover, in recognising the need for consistency with reporting under the EU financial market legislation ACER in Recommendations has initially refrained from proposing REMIT self-standing definitions for "transaction", "agreement", "contract", "trade", "tradable instrument", "bid and offer", "execution", "spot market" and "order to trade", but this approach has apparently been changed in the TRUM - see for instance TRUM definitions for a "contract" and "transaction".
The above complexities notwithstanding, REMIT Implementing Regulation has adopted the rule (Article 6(4)) that information in relation to wholesale energy products which have been reported in accordance with MiFIR (Article 26) or EMIR (Article 9) will be provided to the ACER by:
(a) trade repositories,
(c) competent authorities referred to in Article 26 of MiFIR,
(d) the European Securities and Markets Authority,
Moreover, REMIT Implementing Regulation stipulates (Article 6(5)) that where persons have reported details of transactions in accordance with the respective provisions of EMIR and MiFIR their obligations in relation to reporting those details under Article 8(1) of REMIT must be considered as fulfilled.
This principle is also acknowledged in REMIT Implementing Regulation's recitals (Recital 5), which reads:
"[i]n order to avoid double reporting, the Agency should collect details of derivatives relating to contracts for the supply or transportation of electricity or natural gas which have been reported in accordance with applicable financial regulation to trade repositories or to financial regulators from those sources".
So, the approach finally adopted can be considered as a significant easement for market participants not burdened with duplicative reporting.
However, EMIR and REMIT reporting schemes mustn't be used interchangeably. ACER draft version 2.0 of the ANNEX III to to TRUM – Reporting of REMIT derivatives contracts under REMIT and EMIR underlines, market participants must make sure that supply contracts and derivatives reportable solely under REMIT (e.g. energy derivatives not traded on regulated markets or MTFs) are reported to the ACER and not to EMIR trade repositories.
For example, if a market participant reports all its transactions to a trade repository, including spot and physical forward transactions not captured by EMIR, the market participant is not complying with REMIT unless the trade repository is a Registered Reporting Mechanism (RRM) under REMIT and the market participant has given precise instructions to the trade repository to report its transaction to the ACER.
Derivatives contracts concluded by market participants not established or resident in the European Union
The said ACER's reporting manual acknowledges the fact "a majority of contracts traded under REMIT are for physical settlement, but there may also be derivative contracts that are not reported under EMIR and thus reported under REMIT".
An example of derivatives contracts covered by REMIT, but not reportable under EMIR or MiFIR are derivatives entered into by market participants not established or resident in the European Union.
In the case of a U.S. counterparty, which enters into a transaction on a derivative admitted to trade at an exchange within the EU, most likely the U.S. firm will report that transaction under the U.S. Dodd Frank Act to the U.S. authorities.
However, since the firm traded a wholesale energy product as defined in REMIT, the person is a REMIT market participant and must report that transaction to the ACER in order to comply with REMIT.
Physical/financial trade's significance
TRUM recognises possible different types of settlement of contracts for wholesale energy products with the relevant field of the reporting form reserved for methods that can occur i.e.:
- "P" for physically-settled contracts,
- "C" for contracts settled in cash, and
- "O" for optionality (if the contract can be settled in cash or physically).
TRUM clarifies the influence of the type of settlement on the REMIT reporting requirements as follows:
- When a person only enters into transactions on derivatives traded outside the European Union that are only for financial settlement even though they are related to EU electricity or natural gas (for example a future or a swap that can only be financially settled) that person should not be considered a REMIT market participant and should not report those transactions, unless that person also enters into transactions, including the placing of orders to trade, in one or more wholesale energy markets.
- For example, if a person enters into a transaction on a derivative contract related to EU gas and electricity (such as a futures contract only for financial settlement that is traded on exchange located outside the EU), that person will not be considered a REMIT market participant.
- Another example is when a person enters into a transaction on an exchange traded (or bilaterally) financial swap on two floating gas prices for two monthly contracts i.e. (1) EU Natural Gas Futures contract and (2) U.S. Henry Hub Natural Gas Futures contract of the corresponding contract month, traded outside the EU, that person will not be considered a REMIT market participant.
- However, if that person also enters into transactions, including the placing of orders to trade, in one or more wholesale energy markets, e.g. enters on a physical trade (or derivative) for the delivery of gas or electricity (or transportation of gas or electricity) within the EU, that person is a market participant and has to report all the transactions on wholesale energy products including those trades outside the EU that are only for financial settlement.
- If a person trades only REMIT-related financially-settled derivative contracts traded at organised market places outside the EU, that person is not a market participant and should not report those transactions.
Trading venue's Client/Member status consequences
Annex III to the TRUM (p. 2) accentuates one more crucial delineation. ACER underlines, for derivatives related to EU wholesale gas or electricity products that are only for financial settlement, only the person entering into the transactions in the EU gas or electricity derivatives traded on venues, via its own trading membership, is the REMIT market participant for the purpose of reporting.
For example, a client of an exchange member that places orders to trade on the order book of the venue to trade EU gas or electricity derivatives for financial settlement or it is equivalent (e.g. trading on futures for the physical delivery without having arrangements to take or make the delivery of the commodity) should not be considered a market participant unless the client of the exchange member is itself a member of the exchange for the purpose of this trade.
ACER in its Recommendations initially suggested the following set-up and delays for the reporting of information under Article 8(1) of REMIT:
(1) Records of transactions, including orders to trade, in wholesale energy contracts executed, or placed, at organised market places - through organised market places or third parties on their behalf within one working day;
(2) Confirmations of records of standardised transactions or of transaction in standardised wholesale energy contracts, including derivatives - through trade repositories, clearing houses, trade reporting systems or other Registered Reporting Mechanisms within one working day;
(3) Confirmations of Records of transactions in non-standardised energy commodity contracts - through only one party of the contract or third parties on their behalf within one month;
(4) Scheduling/Nomination data - through Transmission System Operators or third parties on their behalf within one working day.
In case of exchanges, which act as the counterparty to all transactions, also the above-mentioned European Commission consultation document took the initial view that the exchange should report the transaction for both parties.
European Commission similarly considered that when transmission system operators operate balancing markets or other markets where they procure or sell wholesale energy products they could have the sole responsibility for reporting on behalf of both parties to the transaction.
Taking the above into account, finally, Article 6 of the REMIT Implementing Regulation established the following reporting channels for transactions and orders within the REMIT's scope:
1. Market participants report details of wholesale energy products executed at organised market places (OMPs) including matched and unmatched orders to the ACER through the organised market place concerned, or through trade matching or trade reporting systems (the terms at issue are explained in greater detail in ACER's REMIT Q&A points III.3.14 and III.3.15 - see box).
The organised market places where the wholesale energy product was executed or the order was placed have been subjected to the legal obligation to offer a data reporting agreement at the request of the market participant.
ACER explained that if the OMP does not offer a data reporting agreement or is not registered as an RRM, and therefore cannot offer a data reporting agreement, the OMP must nominate a third party RRM and will have to fulfil its obligation to offer a data reporting agreement through the nominated third party RRM. The nominated third party RRM would offer a data reporting agreement to market participants on behalf of the OMP.
Moreover, in the ACER's view such a reporting agreement "may or may not include the possibility to update lifecycle events that occur outside the venue" (ACER's Frequently Asked Questions (FAQs) on REMIT transactions reporting, Question 2.4.3).
Backloading of outstanding contracts executed at organised market places is also excluded from the obligation of organised market places to offer a data reporting agreement on the request of market participants (this is the optional, non-mandatory service of organised market places).
2. Transmission System Operators (TSO) or third parties acting on their behalf are required to report contracts referred (including matched and unmatched orders) on wholesale energy products in relation to the transportation of electricity or natural gas in the European Union between two or more locations or bidding zones concluded as a result of a primary explicit capacity allocation by or on behalf of the TSO, specifying physical or financial capacity rights or obligations.
3. Market participants or third parties acting on their behalf are under the obligation to report the following contracts (whether standard or non-standard) on wholesale energy products, which have been concluded outside an organised market:
a. for the supply of electricity or natural gas with delivery in the European Union, within all time frames (intraday or within-day, day-ahead, two-days-ahead, week-end, after-day, other with a delivery period longer than two days) irrespective of where and how they are traded, in particular regardless of whether they are auctioned or continuously traded,
b. for the supply of electricity or natural gas to a single consumption unit with a technical capability to consume 600 GWh/year or more,
c. options, futures, swaps and any other derivatives of contracts relating to electricity or natural gas produced, traded or delivered in the European Union, unless already reported under EMIR or MiFIR,
d. for the transportation of electricity or natural gas in the European Union between two or more locations or bidding zones concluded between market participants on secondary markets, specifying physical or financial capacity rights or obligations, including resale and transfer of such contracts,
e. options, futures, swaps and any other derivatives of contracts relating to the transportation of electricity or natural gas in the European Union, unless already reported under EMIR or MiFIR.
Moreover, the above framework has been correlated with differentiated start dates for the respective obligations (nine months following the entry into force of REMIT Implementing Regulation (7 October 2015) for organised market places and even fifteen months therefrom (7 April 2016) with respect to conctracts concluded outside organised markets as well as for electricity and gas transportation contracts), which allows for arranging a structured and diligent process to put in place all the necessary procedures and agreements on the part of market participants.
Note, the additional rules on REMIT reporting channels involving trade repositories and ARMs were envisioned for derivatives on wholesale energy products (see above: REMIT in the context of financial market reporting). This, however, does not fully relieve the trade repository customers from REMIT reporting, due to the fact reporting for orders to trade is not encompassed by EMIR derivatives' reporting rules.
The rules finally adopted by the REMIT Implementing Regulation mean, firms don't have to excessively worry about REMIT reporting for transactions executed by means of organised markets, provided, the relevant and carefully structured agreement for reporting has been concluded and a prudent monitoring is effected.
Furthermore, ACER in its Q&As has accentuated the role of organised market places, trade matching systems or trade reporting systems as the sole reporting channels for the details of wholesale energy products executed at organised market places.
The aim of the limitation to the above-mentioned three reporting channels is to ease the reporting for the market participants as specified in Recital 5 of the REMIT Implementing Regulation: ''Since market participants cannot be expected to record such data with ease, matched and unmatched orders should be reported through the organised market place where they were placed or through third parties who are able to provide such information''.
In the regulator's opinion, market participants cannot report details of wholesale energy products executed at organised market places by themselves, regardless of whether they register as Registered Reporting Mechanisms (RRMs) or not.
In its reasoning ACER referred, moreover, to Article 6(1) of Commission Implementing Regulation (EU) No 1348/2014, which clearly defines the reporting channels for the reporting of details of wholesale energy products executed at organised market places, including matched and unmatched orders, to the Agency.
Apart from contracts executed at organised market places, the more bothering case is involved with the "non-standard" contracts, however, such contracts have been granted quite spacious time window for effecting REMIT report - one month following the conclusion, modification or termination of the contract.
Timelines for REMIT transactions and orders reporting are set in Article 7 of the REMIT Implementing Regulation (see box).
This is generally maximally one working day for standard contracts and orders to trade, including for auctions, from the conclusion of the contract or placement of the order.
Any modification or the termination of the concluded contract or order to trade must be reported as soon as possible but no later than the working day following the modification or termination (T+1 basis).
Non-standard contracts have much longer deadlines and must be reported no later than one month following the conclusion, modification or termination of the contract (T+1 month basis).
It is noteworthy, legal formulas at issue use wordings such as "as soon as possible but no later than" (for standard contracts) and "no later than" (for non-standard contracts). It indicates that for both standard and non-standard contracts the term in practice is shorter than the maximal deadline if there are possibilities to report earlier.
ACER's Q&As on REMIT contain a remark stating that reporting of data by the market participant before the actual date of fulfilling this obligation is welcomed by ACER.
The EU energy market regulator stressed that the market participant's data reporting agreement should contain a provision governing the obligation to report the contract on the 'working day following the conclusion of the contract or placement of the order'.
Separate schedules apply to backloading (see below).
"Working days" convention
Moreover, ACER in the document Frequently Asked Questions (FAQs) on REMIT transactions reporting clarified "working days should be understood as business days rather than the exchange trading days. This implies that bank holidays are not working days."
ACER underlined that the timing for reporting under Article 7(1) in REMIT Implementing Regulation refers to the 'working day following the conclusion of the contract or placement of the order', which, according the the Agency opinion, implies that it is not the calendar in use in the country of the RRM that should be used but the calendar of the relevant market participant's country.
ACER also referred to the fact that the public holidays of the EU Member States are published in the Official Journal of the European Union (ACER in its comment indicated the list of public holidays for 2015, see here for the list of EU Member States' public holidays in 2016 (2016/C 19/04)).
The Agency will not consider as public holidays the ones at federal state/regional level that are not listed to the above mentioned list.
Timelines for reporting life-cycle events
It has been clarified by the regulator that analogous rules apply for life-cycle events regarding original reports (ACER's Frequently Asked Questions (FAQs) on REMIT transactions reporting, Question 3.4.3), hence, respectively:
- if a "new" report is due to be reported on T+1 basis, all the life cycle events related to that report have to be reported on a T+1 basis,
- if a "new" report is due to be reported on T+1 month basis, all the life cycle events related to that report have to be reported on a T+1 month basis.
Timelines for transportation contracts reporting
When considering timeframes for for reporting transportation contracts the distinction must be made between:
- Primary explicit capacity allocation (Article 3(1)(b)(i) of REMIT Implementing Regulation - "contracts relating to the transportation of electricity or natural gas in the Union between two or more locations or bidding zones concluded as a result of a primary explicit capacity allocation by or on behalf of the TSO, specifying physical or financial capacity rights or obligations"), and
- Secondary transportation contracts (Article 3(1)(b)(ii) of Commission Implementing Regulation (EU) No 1348/2014 - "contracts relating to the transportation of electricity or natural gas in the Union between two or more locations or bidding zones concluded between market participants on secondary markets, specifying physical or financial capacity rights or obligations, including resale and transfer of such contracts").
Details of contracts concluded as a result of primary explicit capacity allocation must be reported as soon as possible but no later than on the working day following the availability of the allocation results (any modification or the termination of the concluded contracts must be reported as soon as possible but no later than on the working day following the modification or termination).
Secondary transportation contracts are not standard contracts and they therefore have to be reported on a T+1 month basis (ACER's Frequently Asked Questions (FAQs) on REMIT transaction reporting, Question 4.1.3).
The scope for reportable data
REMIT Regulation itself specifies the reportable data as transactions and orders in relation to wholesale energy products, including the price, quantity, date and time of trades.
The list of reportable contracts is stipulated by Article 3 of the REMIT Implementing Regulation (see box).
The above level 2 framework is supplemented by four tables annexed to the REMIT Implementing Regulation, which contain the detailed elements to be reported (categorised by contract type):
- Table 1 - Reportable details of standard contracts for the supply of electricity and gas (Standard reporting form),
- Table 2 - Reportable details of non-standard contracts for the supply of electricity and gas (Non-standard reporting form),
- Table 3 - Reportable details of wholesale energy products in relation to the transportation of electricity — Primary allocation results and result of secondary market resale and transfer of long term transmission rights in electricity,
- Table 4 - Reportable details of wholesale energy products in relation to the transportation of gas — Primary and secondary capacity allocations for gas (see the REMIT Implementing Regulation in the attachment to this article for the text of the above four tables).
REMIT Implementing Regulation underlines, moreover, the reportable details must only include data which can be extracted from market participants' existing records.
REMIT transactions' reporting requirement has comprehensive character as all contracts to OTC physical purchase orders have to be reported to the ACER in line with Article 3(1)(a) of Commission Implementing Regulation (EU) No 1348/2014 (ACER's REMIT Q&A point III.3.11).
In turn, the coverage of the orders to trade reporting under REMIT is restricted since orders have to be reported only:
Such an interpretation is confirmed by ACER with the following reasoning behind:
- Article 6 of Commission Implementing Regulation (EU) No 1348/2014 defines the reporting of orders to trade explicitly in paragraph 1 (for wholesale energy products placed at organised market places) and paragraph 2 (for primary explicit capacity allocations placed at allocation platforms) - beyond that, there is no obligation to report orders to trade (see e.g. Article 6(3) of Commission Implementing Regulation (EU) No 1348/2014 for activities outside an organised market place).
- Recital 5 of Commission Implementing Regulation (EU) No 1348/2014, clarifies the importance of monitoring orders to trade for an effective market monitoring, but refers exclusively to those orders placed at organised markets.
One should be mindful of the fact that Article 6(8) of the REMIT Implementing Regulation confers the ACER with power to request additional information and clarifications from market participants and reporting parties in relation to their reported data. Hence, elements contained in the tables annexed to the REMIT Implementing Regulation don't exhaust the entire scope of information available to ACER, provided ACER requested access to such additional data.
It is noteworthy Article 3(1)(b) of the REMIT Implementing Regulation refers to "transportation" of electricity or natural gas, which terminology departs from "transmission" and "distribution" legally defined in the Third Energy Package.
"Transportation" contracts as used in the REMIT Implementing Regulation seem to cover both "transmission" and "distribution" in the above sense.
List of standard and non-standard contracts
From practical point of view the important task for market participant when it comes to REMIT reporting will be the qualification whether the contract is standardised or not (REMIT Implementing Regulation uses the terminology: "standard contract" and "non-standard contract").
The ACER's list of standard wholesale energy contracts specifies the types of such contracts.
Practically, decisive for the reporting as standard contract or non-standard one is the fact whether a contract is or is not listed as such in the Agency's REMIT database, but the primary criterion (Article 2(2) and (3) of the REMIT Implementing Regulation) remains whether the contract has been admitted to trading at an organised market place (irrespective of whether or not the transaction actually takes place on that market place).
All non-listed energy commodity contracts are considered non-standard and are to be reported with the non-standard reporting form, but including a copy of the contract as such in order to enable the Agency to revert to it in the market monitoring of wholesale energy markets in case of suspicious behaviours.
The ACER's list of standardised wholesale energy contracts is planned to be updated regularly.
Each contract published in the ACER list of standard wholesale energy contracts is categorised through a limited number of dimensions, in order to recognise if different products brands in different organised market place actually refer to the same substantial product.
Furthermore, such ACER list provides a standard product taxonomy, i.e. a grouping of contract categories, for energy commodity contracts (using the above category dimensions), which is binding for the industry in order to categorise transactions by their product types in the context of reporting records of transactions.
Reporting framework for non-standard contracts "specifying at least an outright volume and price"
The above-mentioned extended reporting window may occur quite useful, since in the light of remarks contained in the TRUM (see for example point 3.2.5, p. 15) the differentiation between standard contracts and "non-standard" ones as well as the applicability of the respective reporting forms becomes in certain cases more complex.
This applies in particular to non-standard contracts specifying at least an outright volume and price, for which the specific provision of Article 5(1) of the REMIT Implementing Regulation stipulates: "[d]etails of transactions executed within the framework of non-standard contracts specifying at least an outright volume and price shall be reported using Table 1 of the Annex".
In this way the criteria for the division between Table 1 (standard reporting form) and Table 2 (non-standard reporting form) have become somewhat less clear.
According to the TRUM, this Article implies that "even if the contract is considered non-standard contract but has an agreed price and quantity, the contract has to be reported using Table 1 of the Implementing Acts.
However, it is important to note that under the non-standard contract reporting requirement such a contract would be reportable no later than 30 days from its execution rather than within the time limit for standard contracts of no later than the following business day."
It appears, the non-standard contracts specifying at least an outright volume and price have been assessed by legislators as deserving the specific, hybrid approach when it comes to reporting deadlines and forms.
But how to identify - from a market participant's perspective - contracts "specifying at least an outright volume and price"?
The practical guideline from ACER's TRUM is as follows:
"As far as the Agency is aware, details of transactions executed within the framework of non-standard contracts specifying at least an outright volume and price are available to both parties to the contract by the invoicing date at the latest. On that basis, those executions under the framework of non-standard contract are reportable no later than 30 days after the invoicing date using Table 1 of the Annex of the Implementing Acts."
Hence, it could be inferred that when there are, in practice, doubts whether given contract "specifies an outright volume and price" (for example, as a result of inherent price formulas, more or less complex), in could be reasonable, as ACER advises, to report such a contract within the reporting 30-day deadline starting on the invoicing date.
Considering, however, that, usually, invoicing takes place as a result of certain settlement processes, evidenced in the respective documentation, sometimes the aforememtiond starting point may be placed even earlier. In seems it would be better to err on the side of caution in that regard.
An example illustrating how this mechanism could work in practice can be found in the ACER's Frequently Asked Questions (FAQs) on REMIT transactions reporting (Question 1.1.15 - see the box).
As indicated in the ACER's FAQs on REMIT transactions reporting (Question 3.1.1) market participants should not, however, understand the above clarifications as an indication that under REMIT they have to report the components of their invoices which include taxes, costs and adjustments not in the scope of REMIT.
It is also noteworthy, a backloading process has been envisioned by the REMIT Implementing Regulation (similar to that which was carried out under EMIR derivatives' reporting phase-in).
REMIT reporting backloading means that details of wholesale energy contracts which were concluded before the date on which the reporting obligation becomes applicable and remain outstanding on that date (respectively on 7 October 2015 and on 7 April 2016) must be reported to the ACER within 90 days after the reporting obligation becomes applicable for those contracts.
Hence, the backoading deadlines are 5 January 2016 for contracts traded on organised market places and 6 July 2016 for contracts traded outside such markets.
ACER clarification in that regard is as follows:
"While the contract was concluded before the start of transaction reporting and it remains outstanding at the start of transaction reporting, it has become a reportable contract. Pursuant to Article 7(6) of Commission Implementing Regulation (EU) No 1348/2014, the outstanding contract has to be reported within 90 days of the applicable reporting day. The market participants shall register with the relevant national regulatory authority within 90 days after the go-live on 7 October 2015, i.e. by 5 January 2016 at the latest and in any case prior to the reporting of the backloaded contract to the Agency. In order to facilitate the registration and reporting processes, the Agency advises the market participants to register well in advance of reporting of their outstanding contracts."
In the ACER's view outstanding contracts are those contracts that have an outstanding physical or financial flow as defined by the contract and not by the settlement of invoice date.
For futures and other derivatives, the Agency expects to see as backloaded the positions that are technically still "open" and that can be still trade out or to be settled.
An example of a backloaded reportable contract is the Winter 2015-16 contract entered into in June 2015 (example from ACER's REMIT Q&As).
ACER, moreover, specified that the following trades are in scope for backloading:
- trade, which expires on 07/10/2015, but settles a day or two later,
- trade, which expires prior to 07/10/2015, but settles on 07/10/2015.
Trade, which expires and settles prior to 07/10/2015 is out of scope for backloading.
Equally, with respect to application date 7 April 2016 ACER confirmed that where the contract and all its aspects have been concluded/settled/delivered prior to 7 April 2016 the obligation to report backloaded contracts does not apply.
There is no obligation to backload orders to trade.
Executions under non-standard contracts
Executions under non-standard contracts are not subject to back loading reporting (TRUM Annex II, p. 6).
The consequence of this fact is the execution under the framework of non-standard contracts concluded before the 7 April 2016 do not fall under the scope of back-loading.
Moreover, executions under the framework of non-standard contracts with a delivery period ending before the nonstandard contract is back loaded do not need to be reported.
The general rule is executions under the framework of non-standard contracts should be reported with Table 1 and linked to non-standard contracts that have already been reported to the Agency with Table 2.
Since there is a three-month period time for the back loading of outstanding non-standard contracts, transactions executed under the framework of non-standard contracts are reportable if they take place after the reporting of the back loaded report (ACER's Frequently Asked Questions (FAQs) on REMIT transactions reporting, Question 3.6.1).
Modifications to the backloaded contracts
The problem may arise how to report modifications to the backloaded contracts. Clarifications in that regard can be found in an answer to the Question 3.2.1 in the ACER's Frequently Asked Questions on REMIT Transaction Reporting.
ACER in the first place observed the reportable date of the contract is the date of the first binding agreement.
For historical contracts the date of the last adjustment should be used at the time of reporting (new report).
The last adjustment in this context is the last agreed contract modification, which would be a life cycle event modification to the previous contract version, once the reporting obligation started.
An example of a contract modification is when two parties agree to amend one or more terms of the original agreement (e.g. price, quantity) or any other information from the contract that would need to be reported as life cycle event, once the reporting obligation started.
Any following adjustment should be reported as life cycle event (modification).
For example, if a contract was signed in 2005 and reported as backload (new report), this should report the 2005 date.
Example 1: Contract signed in 2005 and reported to the agency in April 2016: the date to be reported is 2005.
If a contract was signed in 2005 and adjusted in 2015, then the report (new report) should show the 2015 date:
Example 2: Contract signed in 2005 and adjusted in July 2015 and reported to the Agency in April 2016: the date to be reported is July 2015.
Once the contract is reported to the Agency, then any amendment to it should be reported as life cycle event (modification) of the original contract:
Example 3, the contract was already reported to the Agency in April 2016 and modified in July 2016. This should be reported as modification report to the original contract with July 2016 date.
No obligation on organised market places to offer a data reporting agreement for backloading
Market participants need to be mindful of the fact that the obligation for organised market places to offer a data reporting agreement on the request of the market participants does not apply to the backloading of outstanding contracts executed at organised market places (however, organised market places may nevertheless be willing to assist the market participants with the backloading reporting).
Scope for backloaded data
Another important reservation is that the details reportable under the backloading provision only include data which can be extracted from market participants' existing records.
They should at least comprise of data referred in Article 44(2) of Directive 2009/73/EC and in Article 40(2) of Directive 2009/72/EC.
REMIT Implementing Regulation makes also reference to Article 40(1) of Directive 2009/72/EC and Article 44(1) of Directive 2009/73/EC which stipulate record keeping obligations of at least five years for the relevant data relating to all transactions in electricity and gas supply contracts and electricity and gas derivatives.
Responsibility for REMIT reporting
The issue of responsibility for REMIT reporting was controversial at the early stages of REMIT implementing acts' legislative process.
In particular, the major discrepancy was visible in that regard between the initial views of the European Commission and ACER's Recommendations.
As the European Commission argued, for transactions, where there is no central or common counterparty, e.g. for brokered transactions, it is probably not desirable to specify which counterparty is responsible for the transaction reporting, thus both entities should remain responsible for reporting the transaction, clearly identifying that the trade is only one transaction, e.g. by using a unique identification code.
In turn, ACER's view expressed in Recommendations was for bilateral contracts only one-party reporting is sufficient.
REMIT Implementing Regulation refers to this issue in Recital 3, which reads: "[i]n general, both parties to the contract should report the required details of the concluded contract. To facilitate reporting, parties should be able to report on each other's behalf or use the services of third parties for this purpose".
Moreover, there is provision in Article 6(7) of the REMIT Implementing Regulation, which stipulates "[w]here a third party reports on behalf of one or both counterparties, or where one counterparty reports the details of a contract also on behalf of the other counterparty, the report shall contain the relevant counterparty data in relation to each of the counterparties and the full set of details that would have been reported had the contracts been reported by each counterparty separately."
The problem has finally been resolved by Article 11(2) of the REMIT Implementing Regulation (see box). It has been prescribed that the person effecting reports through a third party is not responsible for failures in the completeness, accuracy or timely submission of the data, which are attributable to the third party.
In those cases the third party will be held responsible for those failures. Person effecting reports through a third party nevertheless has legal obligation to take "reasonable steps" to verify the completeness, accuracy and timeliness of the data submitted through third parties.
In this context an ambiguity arouse on the scope of "reasonable steps" that the persons required to report data should take in order to verify the completeness, accuracy and timeliness of the data which they submit through third parties.
The primary observation is that the necessary element for the effective control of the completeness, accuracy and timeliness of the data is the market participant's access to the RRM's records.
This is not questionable as RRM Requirements document (p.19) clearly states: ''RRMs reporting data other than their own data must have a mechanism in place to ensure that the person on behalf of whom they report can be granted access to the data submitted to the Agency by the RRM as well as to Agency's receipts detailing out what data was reported and on the outcome of the reporting."
This access is required to be equally available to the market participant itself as well as the third party chosen by the market participant.
ACER additional clarification contained in REMIT Q&As is that the said access should be granted "with consideration to the principle of transparency, fairness, non-discrimination and in line with competition law."
As regards the relevant check's frequency, the Agency suggests, as guidance regarding the reasonable steps, market participants should undertake verification of data samples in the predefined time period at least on a quarterly basis, but at a higher frequency depending on the market participant's size and/or volume of transactions in the relevant period may be considered reasonable.
Another potentially contentious issue settled by ACER was the indication of the entity responsible for the completeness, accuracy or timely submission of data in case where data reporting was delegated to a third party (under Article 6, 8 and 9 of the REMIT Implementing Regulation).
While resolving this problem it needs to be established whether the failure in data reporting is attributable to a third party or a market participant (as Article 11(2) of the REMIT Implementing Regulation requires).
E.g. if the third party reports corrupted/incorrect data or data are reported with a delay, the third party will be responsible for that failure.
If the failure is attributable to a person required to report the data e.g. the person provides incorrect data, or data with a delay to a third party, then the person required to report the data will be responsible for that failure.
It is the ACER's opinion that in cases where an OMP has outsourced reporting to another RRM, the notion of 'person required to report data' in Article 11(2) of the REMIT Implementing Regulation includes the OMP itself. Otherwise there would be a missing link in the reporting chain and it would not be possible to ensure data quality.
Furthermore, ACER clearly underlined that responsibility for the failure in data reporting cannot be transferred by the data reporting agreement between persons required to report data and the third parties reporting data on their behalf.
Accordingly, should an organised market place offer a data reporting agreement according to Article 6(1), second subparagraph, of Commission Implementing Regulation (EU) No 1348/2014, to a market participant, it will not be possible to limit the responsibility, with such a data reporting agreement, of the organised market place concerned being a third party for the reporting of data in the meaning of Article 11(2), second subparagraph, of the REMIT Implementing Regulation.
Any such contractual delegation of responsibilities from an organised market place to a market participant would be in breach of a directly applicable EU regulation and therefore illegal.
Another issue is whether the scope of reasonable steps that a market participant has to undertake in order to verify the completeness, accuracy and timeliness of data differs depending on the reporting channel that the market participant selects.
ACER's commentaries (Q&As on REMIT, Question III.2.44) specify that the market participant selecting the organised market place for data reporting is relieved from taking reasonable steps to verify the completeness, accuracy and timeliness of the data which organised market places concerned submits as RRMs on their behalf to the ACER to the minimum necessary.
The same applies in case of reporting of wholesale energy products through a third-party RRM selected by the organised market place concerned (since the organised market place concerned is the existing source, it is the organised market place concerned that will have to verify data, which they submit through third party RRMs).
The situation is quite opposite in case of reporting of wholesale energy products through a third-party RRM other than the organised market place concerned selected by the market participant (i.e. another organised market place, trade matching or trade reporting system).
Whilst the organised market place concerned will still be responsible for the completeness and accuracy of the relevant source data, the market participant is responsible for accuracy, completeness and timeliness of the data concerning:
(1) the transfer of the data from the organised market place concerned to the third-party RRM selected by the market participant,
(2) the handling of the data by the third-party RRM and
(3) the transfer of the data from the third-party RRM to the Agency. Both transfers entail a significant risk to undermine the completeness, accuracy and/or timely submission of data to the Agency.
Regarding the transfer of the data from the third-party RRM to the Agency, the market participant will not be responsible for failures in the completeness, accuracy or timely submission of the data in cases where these failures are clearly attributable to the respective third party.
Nevertheless, the market participants will have to prove to National Regulatory Authorities, on their request, that they have undertaken reasonable steps to verify the completeness, accuracy and timeliness of the data submitted to the ACER.
The issue of reporting responsibility is also involved with Registered Reporting Mechanisms (RRMs), which, in the light of manuals made available by ACER on the REMIT Portal on 8 January 2015, emerged as the key REMIT reporting vehicle.
The initial design for RRMs was set up in Recommendations. Accordingly, RRM were meant to be a mechanism or entity reporting records of transactions, including orders to trade, on behalf of a market participant and fulfilling the registration requirements for reporting defined by the ACER.
Finally, ACER's RRM Requirements as of 7 January 2015 supplemented the above definition with the two elements: i.e. RRM were entrusted, additionally, with the fundamental data reporting, as well as it was specified that RRM is a person that reports to ACER "directly".
The meaning of the latter amendment has been explained by ACER in closer detail in the said RRM Requirements where it was specified that in case of a reporting delegation chain (e.g. counterparty A delegates the reporting to counterparty B, which, in turn, delegates the reporting to C), only the entities submitting data directly to the Agency (C, in the example above) must register as a RRM.
The two options were initially, however, considered when it comes to the problem whether market participants reporting directly to ACER would be required to register as RRMs.
The draft TRUM referred to this issue with the following words:
"Market participants' obligations under Article 8(1) of REMIT are to make sure that they have successfully provided their transaction reports to ACER. Market participants and third parties reporting on their behalf must comply with the RRM requirements defined by the Agency. Market participants may choose either to become an RRM themselves or to use one or more third party RRMs to submit transaction reports to the Agency."
However, the issue remained controversial as EUROPEX remarks on the TRUM, with respect to Data Field Number 6 – Reporting entity ID, noted:
"[t]he guidance on Reporting entity ID advises that market participants may only become RRMs in some cases. It must be emphasized that art. 8 of REMIT itself allows market participants to report trade data to ACER by themselves. Therefore, the limitation on entities who can become RRMs imposed by ACER is contrary to the Regulation and should not be maintained."
With Article 11 and Recital 9 of the REMIT Implementing Regulation the option requiring market participants reporting directly to ACER to become RRMs has prevailed.
Also CEREMP manual on occasion of market participant's registration requires to select whichever RRMs market participant intends to report through or, alternatively, to indicate that the market participant intends to "self-report by registering as a reporting entity".
It is likely that most transactions will be reported to the ACER through an organised market place, which will provide reports for all market participants active on the market place. Market participants should not report any activity they perform on that market place unless they believe that the activity being reported on their behalf is incorrect. This is, however, under condition that the relevant reporting agreement has been concluded between the organised market place as the REMIT Implementing Regulation requires the organised market places to offer such agreements on market participant's request.
Given that, finally, the conception requiring market participants reporting directly to ACER to register as the RRM prevailed, there was a postulate towards ACER that the RRMs requirements on this target group were not so onerous as on "professional" RRMs (i.e. those reporting third party data).
ACER REMIT RRM Requirements referred to this problem explaining "that it is not possible for the Agency to state in advance of the registration process which policies / mechanisms are considered in compliance with the requirements. The assessment may vary depending on the type of data reported, on the type of reporting entity (professional third parties handling market participants' data / market participants reporting their own data), on the size of data reported, on the number and variety of data sources and on other relevant factors."
It appears the said issue will be managed, at least to a certain extent, on a discretional basis, which is, perhaps, an efficient and a flexible measure, but obviously, not transparent. To be honest, in the RRM Requirements ACER makes multiple easements for specific categories of market participants, in particular those only reporting details of their leg of a contract and on behalf of the other counterparty.
Any activity that a market participant is involved in outside of an organised market place, for example OTC or non-standard contracts, should be reported by the participant through an RRM. The market participant should ensure that the report is submitted only once to the Agency. Overreporting (which may occur when non-reportable contracts are not separated) should also be avoided - such over-reported transactions will typically be rejected by the ACER.
Trade repositories and ARMs as RRMs
The preliminary conception for trade repositories' treatment versus RRMs' requirements expressed in Recommendations was that the said trade repositories registered by ESMA under EMIR should be required to become Registered Reporting Mechanism (RRM) under REMIT and report derivatives to the ACER in order to ensure consistency.
Moreover, the Draft REMIT ACER Guidelines for the registration of Registered Reporting Mechanisms stipulated that a trade repository fulfilling the respective EMIR requirements would be considered as registered RRM if all the required technical implementing standards had been implemented in full.
Final determination made by Article 11(1) of the REMIT Implementing Regulation is that trade repositories registered under EMIR and ARMs registered under MiFIR will be considered to automatically fulfill the RRMs' requirements:
(a) to ensure the security, confidentiality and completeness of information,
(b) enable the identification and correction of errors in data reports,
(c) enable the authentication of the source of information,
(d) ensure business continuity.
Contracts for the use of final customers
600 GWh/year consumption threshold
As was said above, prominent, but not the only examples of contracts, which must be reported by market participants themselves or third parties acting on their behalf, are contracts concluded outside an organised market for the supply of electricity or natural gas to a single consumption unit (being "a resource which receives electricity or natural gas for its own use" - Article 2(12) of the REMIT Implementing Regulation) with a technical capability to consume 600 GWh/year or more.
In this context it may be useful to recall, contracts for the supply and distribution of electricity or natural gas for the use of final customers are not wholesale energy products save where the final customer's consumption capacity is equal to or greater than 600 GWh per year ('consumption capacity' to be understood in the specific meaning accounting for markets' connectivity - see box).
In its Q&As on REMIT ACER also specified that if a final customer has a contract for the supply of electricity or gas to multiple consumption units and one of those consumption units has a technical capability to consume 600 GWh/year, that multi-site contract would be reportable under Article 3(1)(a)(vii) of the REMIT Implementing Regulation.
However, in the ACER's opinion if a final customer has separate contracts for each consumption unit and only one of their units has a technical capability to consume 600GWh/year, only the contracts relating to that unit would need to be reported under Article 3(1)(a)(vii) of REMIT Implementing Regulation. This, undoubtedly, is an important interpretation.
It is to be also noted that the aforementioned Article 3(1)(a)(vii) of the REMIT Implementing Regulation, which establishes the said threshold of 600 GWh/year, refers only to the supply contracts.
This fact has far-reaching consequences, for example when a transport capacity between a market participant and an end user with a site, which does not have the capacity to consume more than 600 GWh/year, is transferred, such a contract must be reported (Article 3(1)(b)(i) or (ii) of the REMIT Implementing Regulation).
This is even though the gas delivery contracts themselves are not to be reported, because the threshold of 600 GWh/year refers to the supply contracts pursuant to Article 3(1)(a)(vii) of the REMIT Implementing Regulation and not to the transportation contracts (Questions and Answers on REMIT, Question III.3.33).
To allow for the fulfilment of REMIT reporting requirements, the obligation has been placed by Article 3(2) of the REMIT Implementing Regulation on the final customers party to a contract for the supply of electricity or natural gas to a single consumption unit with a technical capability to consume 600 GWh/year or more, to inform their counterparty about the technical capability of the consumption unit in question to consume the above volumes of energy.
In the REMIT Q&As ACER advises market participants that the notification obligation can be included as a part of the contract for supply of electricity or natural gas to final customer.
As for the outstanding contracts for supply of electricity or natural gas to final customers, the Agency anticipates that the final customers will notify their counterparties in a standard way as defined by the outstanding contracts.
In order to raise awareness on the final customer's notification obligation, the Agency also recommends the counterparties to the contracts for supply of electricity or natural gas to remind the final customers on their notification obligation under Article 3(2), third subparagraph of REMIT Implementing Regulation.
Technical capability to consume
As was said above REMIT Implementing Regulation requires contracts for the supply of electricity or natural gas to a single consumption unit with a technical capability to consume 600 GWh/year or more to be reported to the ACER (Article 3(1)(a)(vii)).
ACER commented broadly on how the "technical capability to consume" needs to be assessed by final customers.
The Agency understands "technical capability to consume" to mean the maximum amount of energy that a final customer could consume in a year, i.e. if the customer were to run its facility fully at all times throughout the year. The consumption relates to gas or electricity. The consumption of gas and electricity should be assessed separately to estimate whether it reaches the 600 GWh/year when the facility is running fully at all times. This is because Article 2(5) of REMIT itself refers to the consumption of a final customer of 'either electricity or natural gas', meaning one or the other.
What's important, the 600 GWh/year threshold in Article 3(1)(a)(vii) of the REMIT Implementing Regulation relates to the consumption of gas or electricity, irrespective of the purpose of this consumption. ACER has confirmed in Q&As on REMIT that if a single consumption unit has a technical consumption capability greater than 600 GWh/year, then contracts for the supply of electricity or gas to that unit are reportable, irrespective of whether the purpose is burning gas or using it for other purposes (natural gas used as feedstock, etc.).
In assessing 'technical capability to consume', the Agency is, moreover, of the view that final customers should take into account the amount of energy that the single consumption unit consumes or has capacity to consume. If a single consumption unit consumes 600 GWh/year or more of either gas or electricity, then it is clear that their "technical capability to consume" is also greater than 600 GWh/year and therefore all contracts for the supply to this single consumption unit are reportable.
If, in turn, a single consumption unit typically has an annual consumption of below 600 GWh/year, final customers should make an assessment of the unit's technical capacity to consume. To do this, consideration should be given to the consumption capability of the unit in the first instance i.e. the amount of energy that would be consumed if the single consumption unit was to run at its maximum output over a year.
If on this basis the single consumption unit has a consumption capability of over 600 GWh/year, final customers may also consider the import capacity of the unit i.e. the maximum amount of energy (either electricity or gas) that can flow from the network into the unit.
If this import capacity constrains the unit's technical capacity to a level below 600 GWh/year, it is the Agency's view that the unit would not meet the 600 GWh threshold.
Final customers should also be aware that if there is any change to the technical capability to consume of a single consumption unit, they should re-evaluate whether this unit meets the 600 GWh threshold.
The Agency suggests caution around the use of historical consumption to estimate technical capability to consume as this does not relate to the actual capability of the unit and circumstances can change which might result in additional consumption.
ACER ads, moreover, there may be limited circumstances where this could be a reasonable approach (REMIT Q&As Question III.3.20).
Final customers' contracts traded at organised market places
Beyond issues involved with the 600GWh/year consumption threshold, another group of final customers' contracts that are reportable under REMIT are final customers' contracts traded at organised market places.
ACER in Q&As on REMIT confirmed all contracts traded at organised market places are reportable records of transactions of wholesale energy products and should be reported in line with Article 8 (1) of REMIT and with the rules defined in the REMIT Implementing Regulation.
Consequently, final customers' contracts traded at organised market places should be reported to the ACER and the final customer is required to register in line with Article 9(1) of REMIT.
ACER's interpretations of 16 February and 31 August 2016
Note also that on 16 February 2016 ACER published a series of important comments on the final customers' requirement to report transactions and orders under REMIT (see 4 boxes below).
ACER, in particular, set out the following overall picture of REMIT reporting obligations resting on final customers:
I. Final customers with a single consumption unit with a consumption capacity of 600 GWh/year or more should report all their contracts for the supply of energy, derivatives and transportation which fall under Article 3(1) of REMIT Implementing Regulation.
II. In turn, final customers with a single consumption unit with a consumption capacity lower than 600 GWh/year must report with respect to energy and natural gas:
1. contracts for the supply they traded on an organised market place, and,
2. if traded outside an organised market place:
a. contracts for the sale (considering that this is not for consumption use),
b. contracts for the transportation,
However, in the 31 August 2016 edition of REMIT Q&A ACER granted significant exemption (Question III.3.42 Scenario III) from the earlier, rigorous approach.
The general rule is that if the final customer resales energy, such a contract must be reported under REMIT even if the final final customer at issue is below the threshold 600 GWh/year.
The said exemption relates to final customers located within the closed distribution systems or on the same site like e.g. shopping mall, airport. The resale of energy in such circumstances does not effect in losing the final customers' status if the final customers can buy the energy only from another final customer (for example, energy is bought as a part of the tenancy agreement).
Given the importance of this case for many market participants it is quoted below.
"Scenario III: Energy was purchased by the final customer B. However, the final customer B consumes only a part of the energy and the rest of it is provided to other final customers (C, D, E) that are all within the same closed distribution system or on the same site (e.g. shopping mall, airport). In addition, it is important to note that (i) the final customers C to E can buy the energy only from the final customer B (for example, energy is bought as a part of the tenancy agreement) and (ii) overall technical capability to consume of final customer B to E is below 600 GWh/year.
In this case, the contracts between (i) supplier A and the final customer B and (ii) final customer B and final customers C to E are not reportable. In addition, final customer B is not considered a market participant entering into transactions which are required to be reported to the Agency under REMIT regarding such contracts. However, if the overall technical consumption capability of final customers B to E is 600 GWh/year or more, then the contract for supply of energy between supplier A and final customer B will be reportable".
Individual contracts' significance
On 24 March 2016 ACER made clear that where a number of different legal entities share one connection to the grid, if they once were one "single consumption unit", but each individual legal entity (company A, B etc.) has individual contracts for the purchase of electricity, reporting and registration obligations under REMIT only apply to those companies which have a single consumption unit with a technical capability to consume above the 600 GWh-threshold.
The practical example is where a formerly integrated industrial site is separated into different companies and legal entities, all entities still share a common grid connection. As a consequence the site as a whole exceeds the 600 GWh-threshold, however no single entity is close to the threshold.
In such situation, if each company holds individual contracts for the purchase of electricity, the yearly capability of each individual company to consume at this site should be taken into consideration by the companies.
This is under the condition that the said companies are not trading other wholesale energy products (e.g. including but not limited to contracts for the supply of energy traded on an organised market place or derivative contracts).
Final customers' electricity supply - a multitude of factual circumstances
Inevitably, the supply of electricity to final customers will often produce complicated legal relationships.
Regulatory guidance sometimes offers some help in their interpretations.
In particular, in a situation where:
- Company A and company B are market participants,
ACER assessed the contract between A and B in the above circumstances is an electricity supply contract referred to in Article 3(1)(a) of the REMIT Implementing Regulation, and consequently, subject to the REMIT reporting obligation.
If the contract with the final customer contains a clause for volume optionality, it may cause the contract will not be subject to REMIT reporting, where the energy has not been delivered in effect of the customer making use of such a clause.
Transfers of transport capacity between a market participant and an end user
The notion of the "beneficiary" of the contract
Article 8(1) of REMIT requires to report inter alia on beneficiaries of the transaction. As the notion of the ‘beneficiary’ may be to some extent ambiguous, Recommendations explained in that regard the beneficiary is the party subject to the rights and obligations arising from the contract. ACER mentioned the above clarification is in line with ESMA’s understanding of the definition of beneficiary under EMIR. Furthermore, if the beneficiary of the contract is not a market participant, the reporting market participant should identify this beneficiary by a unique code or by a client code as assigned by the legal entity used by the beneficiary.
The TRUM requires the beneficiary ID to be populated in the Data Field No 8 of the reporting format (types of code allowed are ACER code, LEI, BIC, EIC, GLN/GS1 code), while the interconnected Data Field No 10 is intended to be filled in with information on the trading capacity of the market participant or the counterparty (the detailed remarks on the beneficiary of the contract see here).
REMIT's specificity for lifecycle events' reporting
Reporting of lifecycle events under REMIT may differ from lifecycle events reported under other EU legislations.
Pursuant to the TRUM, the following are not expected to be reported under REMIT as they are not activities related to the execution or modification of a transaction entered into a wholesale energy market: confirmation, compression, settlement (pre-settlement, excluding early termination, and/or post-settlement activities), notional increase/decrease (relative to commodity index transactions including derivatives), clearing or option exercise.
The TRUM refers to the situation where contract, after initial execution, is amended in the bilateral and broker trade environment, e.g. counterparties may agree to increase the volume or to amend the price. The TRUM stipulates that if counterparties agree, through the broker, to increase the volume or to change the price of the contract, this must be reported by the broker. The same applies to any other organised market place. Lifecycle events that happen bilaterally between the counterparties without involving a broker, or an organised market, should be reported by the market participants through third parties.
If the contract was traded bilaterally outside the broker platform, market participants may report lifecycle events directly to the ACER if registered as reporting entity.
Reporting upon ACER's reasoned request
ACER in its Recommendations was of the opinion that the exclusion from reporting should apply to:
(1) contracts at administratively-fixed prices, like renewable energy production at feed-in tariffs, as long as information on these contracts is provided with the reporting of scheduling/nomination data and/or with the reporting of information according to Article 8(5) of REMIT, and
(2) OTC intra-group transactions, as long as the relevant group members are registered as market participants according to REMIT.
Irrespective of the above exclusions de minimis threshold was recommended by ACER for production contracts traded by small producers having an installed capacity of up to 10 MW, trading only this capacity, and acting individually in the market, unless trading at organised market places.
Pursuant to ACER Recommendations small producers subject to the de minimis exemption should therefore not be considered as market participants subject to reporting obligations nor subject to the registration requirement, except in those cases in which the producer is trading at organised market places or controlled by a company with reporting obligations. Any reporting exemption was envisioned to be limited to energy commodity contracts and not affect reporting obligations for derivatives according to EMIR.
The content of Article 4 of the REMIT Implementing Regulation indicates the European Commission only partially shared the ACER's views on the scope of exemption from mandatory reporting. In particular, ACER's earlier propositions to exclude from reporting contracts at administratively-fixed prices, like renewable energy production at feed-in tariffs, have not become part of the final REMIT Implementing Regulation and such contracts must be reported as other typical contracts within the REMIT's scope.
When it comes to the REMIT Implementing Regulation firstly, the list of contracts reportable only upon reasoned request of the ACER (unless concluded at an organised market place) has been established. Hence, in final rules the exclusion from reporting is not absolute but dependent on ACER's discretion.
Pursuant to the REMIT Implementing Regulation he said list encompasses individual transactions in relation to the following:
(a) intragroup contracts,
(b) contracts for the physical delivery of electricity produced by a single production unit with a capacity equal to or less than 10 MW or by production units with a combined capacity equal to or less than 10 MW,
(c) contracts for the physical delivery of natural gas produced by a single natural gas production facility with a production capacity equal to or less than 20 MW,
(d) contracts for balancing services in electricity and natural gas.
Note, the above four categories, equalły excluded from REMIT reporting, are diversified when it comes to market participants' registration duties, where only persons captured under points b and c above (production units below 10 MW and 20 MW thresholds) are exempted from registering, while companies entering into intragroup and balancing contracts still need to register (Article 4(2) of the Commission Implementing Regulation).
When referring to the above-mentioned de minimis threshold of 10 MW for reporting important distinction must be made. Namely, the threshold for reporting should neither be confused with a threshold for disclosure of inside information nor with the thresholds for publication of transparency information according to Regulations No 543/2013, No 714/2009, and No 715/2009.
Concerning the threshold for disclosure of inside information, ACER acknowledged in its 2nd edition of Guidance on the application of REMIT that for electricity, an indicative 100 MW threshold may apply, whilst for gas, Member States' national regulatory authorities may define indicative thresholds for relevant natural gas markets at regional or national level.
However, in the subsequent, third edition of Guidance ACER has refrained from specifying of a threshold related to the precise value of MW, referring rather to circumstances of the case, local market conditions and the reasonable judgment of market participants.
10 MW threshold
The above-mentioned de minimis threshold of 10 MW requires some cautiousness also an account of one specific differentiation.
Namely, this exemption is available for the counterparty that owns a 5 MW production unit and sells this output, but not in the case of the same output resale (see box).
ACER in its Q&As has also explained the role of marketing several smaller installations in one common contract. The Q&As' example refers to wind power plants, but, as ACER explicitly points out, applies accordingly for other types of production.
In line with Article 4(1)(b) of REMIT Implementing Regulation, contracts for the physical delivery of electricity produced by a single production unit with a capacity equal to or less than 10MW or by production units with a combined capacity equal to or less than 10MW shall be reportable only upon reasoned request of the Agency, unless concluded on organised market places. Thus, market participants who only complete such transactions do not have to register at the relevant NRA.
According to Article 2(13) of REMIT Implementing Regulation, production unit means a facility for generation of electricity made up of a single generation unit or of an aggregation of generation units. Thus, a production unit is not always a single production unit (e.g. one wind turbine) but it can also be a combination of units (e.g. several wind turbines). In defining a production unit the spatial proximity and the ownership structure are relevant. Thus, a production unit might be a part of a wind farm (e.g. 5 wind turbines) owned by one market participant.
That leads to the following specific examples for wind power plants (accordingly for other types of production):
- A) Contracts for the physical delivery of electricity of a wind farm (or parts of the wind farm) with a total production capacity of less than 10MW are not reportable (diagram at the top left).
- B) Contracts for the physical delivery of electricity of a wind farm (or parts of the wind farm) larger than 10MW are reportable (diagram at the top right).
- C) If a market participant has more than one wind farm (or parts of a wind farm) at his disposal which are spatially separated and each of it has a production capacity of less than 10MW and which are marketed in different contracts, these contracts are not reportable (diagram at the bottom left).
- D) If a market participant has more than one wind farm (or parts of a wind farm) at his disposal which are spatially separated and each of it has a production capacity of less than 10MW and which are marketed in one common contract, this contract is reportable (diagram at the bottom right).
Diagram's source: ACER REMIT Q&As
If the marketing of the production capacity is performed by a third-party – e.g. the operator of a wind farm – and the wind farm has got a total production capacity larger than 10MW, this third-party has to register as market participant and to report the corresponding contracts.
Another ACER's interpretation with respect to productions sites of electrical capacity around the 10MW threshold relates to the issue of self-consumption. The ambiguity as regards REMIT registration and reporting concerned a facility with an installed capacity of 12 MW, which was self-consumimg most of this consumption, and selling the remaining electricity bilaterally through a contract.
The regulator's view of the above situation is as follows: if a contract for the physical delivery of electricity relates to the single production unit with a capacity above 10 MW (Article 4(1) of REMIT Implementing Regulation, it should be reported to the Agency and the market participant entering into such contract should register with the relevant National Regulatory Authority in line with Article 9(1) of REMIT. Therefore, in this example, the bilateral contract should be reported and the contractual entity should register with the relevant National Regulatory Authority.
In turn, in the 19th Edition of its REMIT Q&As (updated: October 2016, Answer to the Question II.4.54) ACER observes, if a production unit produces and consumes its production internally (delivers power within the same facility to the internal grid only and with no export to an external public grid, the capacity above or below the threshold) and has a back-up contract in place to get power from the public grid in case of an outage of the internal electricity production:
- production of electricity by a production unit which is consumed within the same production facility does not constitute a wholesale energy product pursuant to Article (2)(4)(a) of REMIT;
20 MW threshold
In the same 19th Edition of its REMIT Q&As ACER added, moreover, a clarification of practical importance, relating to a gas production facility with a production capacity higher than 20 MW, which is owned by different shareholders, each of them holding a net capacity of less than 20 MW, based on their individual share interests.
Notwithstanding the fact that each partner in the facility at issue has individual gas sale agreements with third parties, such contracts, in the ACER's opinion, have to be reported on a continuous basis as specified in Article 3 of REMIT Implementing Regulation No 1348/2014 and not at the ACER's request pursuant to Article 4(1)(c) of the said Regulation (Answer to the Question II.4.53).
There seems to be no reasonable grounds to not apply this interpretation, by analogy, also to situations where 10 MW threshold is involved (electricity produced by a production unit with a capacity equal to or less than 10 MW).
ACER in Recommendations clearly acknowledged intragroup transactions fall under the scope of REMIT, but recommended the Commission to exclude OTC intragroup transactions from the list of contracts to be reported as long as the members of the group are registered under REMIT. In ACER's view such an approach should limit the administrative burden on a group without mitigating the Agency's information needs.
REMIT Implementing Regulation finally included intragroup transactions on wholesale energy products into the catalogue reportable upon the ACER's reasoned request.
For the avoidance of doubt, REMIT Implementing Regulation introduced legal definitions of the terms: 'intragroup contract' and the 'group', which are understood:
- 'intragroup contract' is a contract on wholesale energy products entered into with a counterparty which is part of the same group provided that both counterparties are included in the same consolidation on a full basis;
- 'group', which is understood coherently across REMIT and MiFID II and refers to the definition in Article of Directive 2013/34/EU on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings (Accounting Directive).
Overall, the above definition's design reflects arrangements elaborated for the purposes of EMIR reporting, which fact, given the mutual interdependencies of both reporting schemes, deserves to be appreciated.
Pursuant to Article 2(6) of Commission Implementing Regulation (EU) No 1348/2014, an 'intragroup contract' is a contract on wholesale energy products entered into with a counterparty which is part of the same group provided that both counterparties are included in the same consolidation perimeter on a full basis.
Article 2(5) of Commission Implementing Regulation (EU) No 1348/2014 defines that the concept of group to be taken into consideration is the one included in Article 2 of Directive 2013/34/EU on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings (in this way the 'group' is understood coherently across REMIT and MiFID II and means a parent undertaking and all its subsidiary undertakings).
Article 2(6) of Commission Implementing Regulation (EU) No 1348/2014 details that 'consolidation on full basis' is the relevant criterion to assess if the contracts are intragroup.
ACER gave in that regard an additional clarification stressing that if a company 'consolidates on a full basis', its assets, liabilities, income and expenses are all shown in full in the consolidated financial statements of the parent company, with the exclusion of the ones related to intercompany transactions that are eliminated in the consolidation process.
For further details on the respective rules and interpretations ACER redirected market participants to the very text of the Directive 2013/34/EU and its implementing laws in the relevant Member State(s).
Simply put, according to the Directive 2013/34/EU 'group' means a parent undertaking and all its subsidiary undertakings - details and the Directive's text see here.
It is noteworthy, ACER commented specifically upon an issue of a lime-limit for registration of a company that only engages in intragroup trading.
Pursuant to ACER, the deadline for registering for market participants who engage in intragroup trading via an organised market place was 7 October 2015. ACER underlined that:
- unless concluded on an organised market place, intragroup contracts are reportable only upon reasoned request of the Agency and on an ad-hoc basis, and
- while the Agency has provided time-limited no-action relief from the requirement to report upon reasoned request for such contracts until 31 December 2017, market participants are required to submit the registration form to the national regulatory authority prior to entering into a transaction that is required to be reported to the Agency in accordance with Article 8(1) of REMIT.
As such, market participants that only engage in intragroup trading outside of an organised market place were required to register by 7 April 2016, in line with the start of transaction reporting for any contracts which have been concluded outside an organised market place (Q&As on REMIT Question II.4.39 made public on 30 September 2015).
Another question related to a party that entered into a contract that falls under both Article 4(1)(a) [intragroup contract] and Article 4(1)(b) [contract for physical delivery of electricity produced by single production unit with a capacity equal to or less than 10MW etc.] of Commission Implementing Regulation (EU) No 1348/2014. The ambiguity was whether that party was required to register as a market participant under REMIT.
The ACER's answer was in the negative:
"According to Article 4(2) of Commission Implementing Regulation (EU) No 1348/2014, market participants only engaging in transactions in relations to the contracts referred to in Article 4(1)(b) and (c) shall not be required to register with the NRA. The Agency considers that this applies irrespective of whether the contract is intragroup or not. Therefore, the party only entering into intragroup transactions in relation to a contract under Article 4(1)(b) or (c) shall not be required to register."
Another issue is the potential deconsolidation of the firm from the consolidated financial statement.
Deconsolidation begs the questions from a reporting point of view: whether existing contracts should be reported to ACER, which timetable to use and what the contract date should be used.
ACER’s answer (FAQs on REMIT transaction reporting) pointed that the deconsolidated company should report all its contracts on T+1 month from its status change with the date of its status change.
Time-limited ACER Staff No-action letter
"... the Department will not recommend that the Agency requests information on contracts and details of transactions in relation to those contracts listed in Article 4(1) of Commission Implementing Regulation (EU) No 1348/2014 at least until 31 December 2016. This is without prejudice to the possibility of national regulatory authorities requesting such information under national law and to the possibility of the Agency to request additional information in relation to reported data according to Article 6(8) of Commission Regulation (EU) No 1348/2014. This letter, and the positions taken therein, represent the view of the Department only, and do not necessarily represent the positions or views of the Agency or of any other office or department of the Agency. The relief issued by this letter does not excuse persons relying on it from compliance with any other applicable requirements stipulated in REMIT or in Commission Regulation (EU) No 1348/2014. Further, this letter, and the relief contained therein, is based upon the information currently available to the Department. Any different, changed or omitted material facts or circumstances might render this no-action relief void."
However, as is clearly underlined in the ACER's Questions and Answers on REMIT, the EU Member States National Energy Regulatory Authorities may still require, under relevant national legislation, data covered by the above no-action letter.
Hence, the said ACER's Staff no-action letter represents not only a temporary, but also a partial relief only.
Nevertheless, in the Letter of 15 December 2016 ACER's respective Departments said the No-action Relief was extended till 31 December 2017.
Further, according to the ACER’s No-action Letter of 14 December 2017 to further extend the relief reporting contacts upon the request of the Agency, the relief, which does not apply to contracts concluded at organised market places, extends at least until 31 December 2018.
REMIT reporting agreements
See the industry standards for REMIT reporting master agreements:
See also the EFET database for REMIT reporting master agreements.
In the relevant communication of 10 June 2015 BDEW, EFET, ENERGY UK, EURELECTRIC , EUROGAS explain the agreements at issue "represent a baseline set of terms that cover the minimum set of data for which OMPs are required, upon request, to offer a data reporting agreement under Article 6(1) of the REMIT Implementing Acts. The agreements are RRM-neutral, meaning they present a base for negotiations, which the parties shall tailor in order to reflect their commercially agreed position and the specificities of their technical and operational functionality. Market Participants may want to explore with their OMPs whether it will be possible for them to expand the scope of the REMIT Reporting Agreements to include other types of transactions, such as trades that are subject to the back loading obligation and lifecycle events that do not take place through an OMP where the original trade was executed on the OMP."
OMPs are required, upon request, to offer a data reporting agreement under Article 6(1) of the REMIT Implementing Regulation, but this data reporting agreement will sometimes take a simplified form, based on an OMP's internal regulations.
For example, ICE Futures Europe Circular 15038 and ICE REMIT Transaction Reporting FAQs July 2015 foresee the relevant ICE Circular - along with ICE Futures Europe Regulations - constitute the data reporting agreement referred to in the said Article 6(1) of REMIT Implementing Regulation, hence for ICE Members' sign up for the ICE REMIT Transaction Reporting Facility no action is required.
For Non-Members, ICE says, a data reporting agreement will be made available upon request but is not a prerequisite for the ICE to report details of all wholesale energy contracts relating to the Non-Member.
ICE Futures Europe uses ICE Trade Vault Europe ("TVEU") as its RRM to submit the required data to ACER.
TVEU is a wholly-owned subsidiary of Intercontinental Exchange, Inc. and is a registered Trade Repository with ESMA.
In order to comply with the obligations prescribed in Article 6(1) of REMIT's Implementing Regulation, the ICE Futures Europe will report details of all wholesale energy orders placed at, and trades executed at (including Block, Exchange for Physical and Exchange for Swap Trade Contracts), the ICE Futures Europe to ACER via TVEU as its RRM. It will also report details of any subsequent modification or termination required by ACER.
In May 2018, the Hungarian NRA (MEKH) sanctioned an organised market place with a fine of HUF 13.6 million (approximately EUR 40,000) for a breach of reporting obligations (Article 8 of REMIT).
MEKH has imposed the following additional obligations on the organised market place:
- to implement processes for the reporting of transactions taking place on its venue within 30 days of the sanction decision;
- to provide the list of standard contracts to the Agency within 30 days of the sanction decision; and
- to report to the Agency all transactions that took place during the non-reporting period within 90 days of the sanction decision (REMIT Quarterly Issue No. 14 / Q3 2018).
26 July 2019
14 December 2017
Commission Implementing Regulation No 1348/2014 of 17 December 2014 on data reporting implementing Article 8(2) and Article 8(6) of Regulation (EU) No 1227/2011 of the European Parliament and of the Council on wholesale energy market integrity and transparency
|Last Updated on Friday, 26 July 2019 12:29|