ACER 2014 REMIT Report Confirms Continued Inquiries into Market Conduct

by Cadwalader, Wickersham & Taft LLP

ACER calls for substantial funding increase to enable more aggressive monitoring and enforcement efforts in coordination with national regulators.

On Tuesday 10 June 2014, the Agency for the Cooperation of Energy Regulators (“ACER”) published its annual report (the “REMIT Report”)1 in connection with the Regulation on Wholesale Energy Markets Integrity and Transparency (“REMIT”).2

The REMIT Report confirms that, for the remainder of 2014 and 2015, ACER will be focused on continuing and expanding its monitoring and investigation of market abuse, completing the implementation process for REMIT, launching the framework for trade reporting and increasing transparency in the gas market. 

1.     Background:  REMIT

REMIT came into force on 28 December 2011.  Among other things, REMIT prohibits market abuse in the wholesale power and gas markets, and intends to increase transparency in such markets by requiring public disclosure of price-sensitive information and the reporting of energy transactions.  While some provisions of REMIT took effect immediately, other provisions, including registration of market participants and transaction reporting, will only become enforceable following publication of further implementing acts, which are now expected in Autumn 2014. 

2.     Market Abuse under REMIT

A core theme of the REMIT Report is its work in respect of illegal market manipulation and insider trading in the energy markets, and ACER’s desire for more funds to enable it to continue and expand its obligations to monitor for such market abuse.  The third edition of ACER’s guidance to NRAs on 29 October 20133 sets out the seven types of market abuse as understood by ACER. 

In 2013, ACER reviewed 13 cases involving potential market abuse, several of which involve multiple potential violations.4  The majority of these matters are ongoing in 2014. Five of the cases related to insider trading, six involved the obligation to publish inside information, and eight investigations related to the market manipulation prohibition. The investigations were commenced following receipt of information from a variety of sources including market observations, self-reports and a Suspicious Transaction Report from another market participant. The REMIT Report specifically highlights the investigation by Ofgem and the FCA in the United Kingdom into the manipulation of the gas market, which concluded in a finding of a lack of evidence to support any potential misconduct.  Furthermore, ACER and the national regulators are developing a strategy to identify potential benchmarking price manipulations.

3.     Enhanced Market Monitoring and Request for Additional Funding

ACER establishes in the REMIT Report that after the data reporting obligation commences, it will continue to develop its market monitoring strategy.5  This includes day-to-day market monitoring once systematic data collection launches, and also the use of the Market Monitoring Handbook, which will ensure cooperation between ACER and the national regulators during investigations.

In a press release on 10 June 2014, ACER highlighted its need for greater funding for a successful implementation of REMIT.  In support of its position, the agency cited the United States Federal Energy Regulatory Commission (“FERC”) as an example to justify any resource costs involved in effective monitoring.  In particular, it noted FERC’s capability to bring multimillion dollar fines in market abuse investigations, which would more than cover the additional funding required.6

If ACER is provided with the additional resources it is requesting, market participants can expect an expansion of its market monitoring activities and more market abuse and manipulation enforcement actions being brought by national regulators.

4.     Memoranda of Understanding

In 2013, ACER signed memoranda of understanding (“MoUs”) with NRAs, the European Securities and Markets Authority (“ESMA”), and organised market places in order to ensure a consistent approach across the EU to address market abuse in the energy markets. Specifically, the MoU between ACER and ESMA7 recognised the overlap between REMIT and the EU financial reform legislation, and the MoU stresses the links between the different EU market abuse regimes.  The MoU, signed on 13 July 2013, is a “statement of intent to consult, cooperate and to exchange information in connection with the regulatory responsibilities”8 of ACER and ESMA. 

Firms should be aware of the agreement to share information between the agencies and to national regulators with the power to sanction market participants. 

5.     ACER Gas Index

ACER intends to make the gas market more transparent by publishing ACER’s own gas energy index.9  When the REMIT implementing acts come into force, ACER will collect all of the trade data in a single repository, and the Director argues that by creating its own index, it will make the market more transparent than it currently is.  While much of the detail surrounding this proposal is yet to be formally published, ACER stated that it expects price reporting agencies to remain relevant, as there will still be a market for those adding value through analysing the data and using it as a tool to interpret what is happening in the market.

6.     Conclusion

In its 2013 report, ACER has again made clear its intent to develop a multi-faceted EU-wide monitoring and investigatory regime to ensure that the prohibitions on use of inside information and various other forms of market manipulation are honored by all energy market participants both within national markets and across borders. Companies must ensure that they have detailed compliance policies and procedures and training programs in place and that they are developing appropriate reporting systems. ACER has also declared its aspiration to achieve enforcement results comparable to the US Federal Regulatory Commission. This should remove any doubt as to the importance of implementation of robust internal compliance programs by every market participant.

1   REMIT Report, 10 June 2014.

2   OJ L 326 pp. 1-16, 8.12.2011.

3   Guidance on the application of REMIT, 3rd Edition, 29 October 2013,

4   REMIT Report, Section 3.4, pp. 41-46.

5   REMIT Report, Section 3.3, pp. 39-41.

6   Implementing REMIT can save millions of euros to EU consumers, ACER Press Release (ACER-PR-07-14), Ljubljana, 10 June 2014.

7   Memorandum of Understanding between ESMA and ACER concerning the consultation and cooperation regarding their regulatory responsibililtes in relation to EU wholesale energy markets, 13 July 2013.

8   REMIT Report, p. 33.

9   Morison, Rachel and Isis Almeida, EU Plans to Publish Energy Indexes From Trade Data, Bloomberg Businessweek, 10 June 2014,

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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