German Energy Watchdog Staffs Insider-Trading DivisionJulia Mengewein
Germany’s power and natural-gas grid regulator has appointed more than half the employees it’s seeking for a new unit to combat potential market manipulation in the region’s biggest energy market.
Bundesnetzagentur, based in Bonn, plans to have about 30 people enforcing the European Union’s regulation on wholesale energy market integrity and transparency, known as Remit, according to Jochen Homann, who heads the agency. The watchdog already has 17 people working on the project to collect and check information from power and gas traders active in Germany starting in the middle of 2014.
“This is a huge project,” Homann said in an interview at his office in Bonn. “All power traders have to register with us. When they make their data announcements, we have to screen everything for signs of potential insider trading and whether we need to follow up on it.”
Remit, which came into force in December 2011, is part of the EU’s campaign to clamp down on insider trading and manipulation in the region’s 900 billion-euro ($1.2 trillion) power and gas markets. Regulators say the low level of transparency comes at the expense of private and industrial consumers who pay more to heat their homes or keep factories running if prices are artificially high.
The European Commission raided the offices of major oil-production and trading companies last month, seeking information on potential price fixing. The U.K.’s Office of the Gas and Electricity Markets is investigating alleged manipulation in the nation’s gas market, Europe’s biggest by trading volume, Lisa O’Brien, a spokeswoman for the regulator, said by phone from London on May 29.
In Germany, the Hamburg tax office said May 30 it was probing possible cases of fraud in the power and gas market after the nation’s Federal Tax Office last month warned it found signs of potential impropriety that may be similar to a 2009 value-added tax scam that roiled the EU carbon market.
The country’s power and gas markets were liberalized in 1998, the start of a process that split up companies that produced and distributed energy while giving other producers and marketers access to the nation’s grids.
“If we fail to make major changes to the way the energy market functions, we will be faced with a less reliable and more costly European energy system,” the European Commission, the EU’s regulatory arm, said in a November letter to the European Parliament.
The Remit rules require traders, grid operators, suppliers, producers, brokers and large users who trade energy products to provide information on the use of infrastructure to store, produce, consume or transmit power or gas. Information about an unplanned halt at a nuclear reactor or at a gas field may cause prices to jump.
“The people in our Remit group all have the necessary experience to deal with this topic,” Homann said on May 6.
Manufacturing plants such as steel and aluminum mills and other large power-consuming installations will also have to report unplanned halts.
“It is good to have transparency in the energy markets, but it will be a huge effort for us to set up the reporting infrastructure,” Carsten van Plueer, a spokesman for VIK e.V., said May 31 by e-mail from Essen, Germany.
The German energy-intensive industry lobby is seeking clarity on what its members will need to report under Remit, van Plueer said.
“If a large consumption unit fails, that usually does not impact the market, but we still need to report it.”
The German grid regulator hasn’t decided which data need to be provided, Homann said. “Also, the exact way of sending the data to us is still unknown,” he said. “But we need to make sure this creates a minimum of bureaucracy.”
Trading in German power amounted to 3,857 terawatt-hours in 2012, about 45 percent of the European total and 7.1 times annual consumption, according to data from London-based Prospex Research Ltd.
Of the 17 people assigned to the new unit at the German grid regulator, 12 were moved from other parts of Bundesnetzagentur and five were transferred from the nation’s cartel office, Homann said.
“In the beginning it was unclear how the tasks to implement Remit would be split between us and the cartel office,” he said. “Now it is clear that the responsibility lies with us, which makes sense.”
About 295 billion euros of German gas and power contracts were handled by brokers in London last year, according to Bloomberg calculations based on average prices and volume data from the London Energy Brokers’ Association.