Our recent LawNow highlighted the increase in the number of fines pursuant to the Regulation (EU) No 1227/2011 on Wholesale Energy Market Integrity and Transparency (“REMIT”) being imposed by National Regulatory Authorities (“NRAs”). However, what are the potential implications of Brexit for REMIT?
If the European Union (Withdrawal Agreement) Bill 2017-19 (“Withdrawal Agreement”) is approved by the UK Parliament prior to 29 March 2019, the EU exit implementation period will run until 31 December 2020, unless otherwise agreed by the UK Government and the EU. REMIT as an EU regulation, would be converted at the moment of exit into UK law under the European Union (Withdrawal) Act 2018, which was granted Royal Assent on 26 June 2018. As a result, the working assumption during the EU exit implementation period is that the current REMIT registration and data reporting channels and obligations will remain unchanged.
Nevertheless, given the current uncertainty around whether the Withdrawal Agreement will be executed, Ofgem released an open letter on 4 December 2018 setting out Ofgem’s contingency plans for how REMIT will apply in Great Britain (“GB”) in the event of a ‘no-deal’ Brexit (“Open Letter”). The Open Letter sets out the following:
- Market Integrity and Transparency Monitoring and Enforcement: Ofgem will continue to monitor and enforce GB wholesale energy market integrity and transparency in accordance with REMIT. The various REMIT obligations placed on market participants (“MPs”) to disclose inside information in an effective and timely manner and the prohibitions on insider trading and market manipulation will continue to apply. The REMIT carve-out for wholesale energy products within MiFID II will be preserved domestically.
- GB Registration: In a no-deal Brexit scenario, all MPs entering into transactions or placing orders to trade in wholesale energy products where delivery is in GB will be required to register with Ofgem within four weeks of Brexit. However, Ofgem intends to issue a direction before 27 April 2019, stating that until further notice, this requirement will not apply to those MPs who are already registered with the Utility Regulator for Northern Ireland (“UREGNI”) or with a NRA of an EU Member State. Ofgem will unilaterally recognise the existing registration of all currently registered MPs as valid for the purposes of compliance with Article 9 of REMIT in GB. New MPs who wish to register with Ofgem for the first time, and existing Ofgem-registered MPs who wish to edit or amend their registrations should contact Ofgem directly. MPs who are required to register with a NRA of an EU Member State for the first time, and MPs already registered with an EU Member State who wish to edit or amend their registrations, should continue to do so in the usual way.
- Re-registering with an EU NRA: In a no-deal Brexit scenario, MPs presently registered with Ofgem who wish to enter into transactions or place orders to trade in wholesale energy products where delivery is in the EU, will be required to re-register with a NRA of an EU Member State.
- Data Reporting: In a no-deal Brexit scenario, fundamental data relating to GB wholesale energy markets and products will no longer be collected by the Agency for the Cooperation of Energy Regulators (“ACER”). Instead, there will be an initial review period after Brexit during which those MPs who currently provide data to ACER will not need to send that data to Ofgem. Ofgem will consult with industry stakeholders regarding any future reporting requirements as part of the review. Following the review, Ofgem will announce the start of GB data reporting by providing at least three months’ notice to MPs. During the review period, Ofgem will continue to monitor the market for possible breaches of market integrity using existing data sources.
Separately, the Department for Business, Energy and Industrial Strategy released a letter on 14 December 2018 summarising the proposed Statutory Instrument (“SI”), which is intended to ensure that the UK can part take in the mechanisms under REMIT once brought into UK law by the European Union (Withdrawal) Act 2018. The SI will modify the REMIT, the REMIT Implementing Regulation (EU) No 1227/2011, and the Regulation on Submission and Publication of Data in Electricity Markets (EU) No 543/2013 for the purposes of UK law in order to ensure that they can operate effectively once incorporated into UK law. A summary of these proposed amendments can be found here.
Ofgem plans to publish a more detailed follow up communication to confirm the GB REMIT arrangements in early 2019, should there be need and continue to prepare contingency measures to ensure the wholesale energy markets in Great Britain remain fully functioning, whatever the outcome of Brexit.