|Wholesale energy products under the REMIT Regulation|
REMIT Regulation applies to trading in wholesale energy products, defined as the following contracts and derivatives:
— contracts for the supply of electricity or natural gas where delivery is in the EU,
— derivatives relating to electricity or natural gas produced, traded or delivered in the EU,
— contracts and derivatives relating to the transportation of electricity or natural gas in the EU.
Contracts for the supply and distribution of electricity or natural gas to final customers with a consumption capacity greater than 600 GWh per year also fall within the scope of REMIT.
ACER Agency in its Guidance on the application of Regulation (EU) No 1227/2011 of the European Parliament and of the Council of 25 October 2011 on wholesale energy market integrity and transparency considers contracts for the supply or transportation of electricity and gas traded intraday, within- day, day-ahead, two-days-ahead, week-end, long-term or any other time period generally accepted in the market as contracts for the supply or transportation of electricity or natural gas.
Derivatives are understood as financial instruments as set out in points (4) to (10) of Section C of Annex I to Directive 2004/39/EC as implemented in Articles 38 and 39 of Regulation (EC) No 1287/2006.
Contracts for the use of final customers
For the purposes of the definition of "consumption capacity", consumption at individual plants under the control of a single economic entity that have a consumption capacity of less than 600 GWh per year are not taken into account in so far as those plants do not exert a joint influence on wholesale energy market prices due to their being located in different relevant geographical markets.
More detailed remarks on the scope and interpretation of the REMIT requirements with respect to contracts for the supply and distribution of electricity or natural gas for the use of final customers with a consumption capacity equal to or greater than the threshold of 600 GWh per year are available at REMIT reporting.
In line with Article 1(2) of Directive 2009/73/EC, the rules established for natural gas, including LNG, also apply in a non-discriminatory way to biogas and gas from biomass or other types of gas in so far as such gases can technically and safely be injected into, and transported through, the natural gas system.
Therefore, if biogas can technically and safely be injected into, and transported through, the natural gas system, it will:
(i) meet all criteria to be treated as natural gas, and
(ii) REMIT will apply for the biogas supply/transportation contracts (ACER's Questions and Answers on REMIT, Question III.3.23).
Storage contracts are not considered wholesale energy products under REMIT (see Q&As on REMIT, Question III.3.30 as in the box).
As the definition of wholesale energy products applies to contracts and derivatives "irrespective of how and where they are traded", the ACER Agency considers that intra-group transactions, i.e. over- the-counter (OTC) contracts entered into with another counterparty which is part of the same group, are considered to be wholesale energy products under REMIT.
Contracts for green certificates and emission allowances
Demand response services
ACER considers that the contract for the provision of demand response services qualifies as a wholesale energy product pursuant to Article (2)(4)(a) of REMIT (Q&As on REMIT, Question II.4.52).
Significance of physically settled wholesale energy products traded on an OTF in the context of financial market
The definition of Section C 6 of Annex I under MiFID I has been changed significantly under MiFID II by classifying options, futures, swaps and other derivative contracts relating to commodities that can be physically settled and are traded on an OTF as financial instruments, in addition to those instruments that trade on MTFs and regulated markets.
However, Section C 6 of Annex I excludes wholesale energy products within the scope of REMIT that are traded on an OTF and that must be physically settled.
Therefore, these excluded wholesale energy products do not qualify as financial instruments and are consequently outside the scope of MiFID, EMIR and the CRD IV package.
Wholesale energy products are exempted from the scope of the Market Abuse Regulation (MAR), except for the prohibitions of market manipulation and insider trading in electricity and gas derivatives where REMIT declares MAR as applicable.
REMIT Regulation, Article 2(4), Article 2(5)
ACER’s Questions and Answers on REMIT, Question III.3.23, Question III.3.30, Question II.4.52
|Last Updated on Thursday, 09 November 2017 13:24|