Abuse regulation could force change in disclosure method

Energy companies using their own websites to disclose inside information on outages that can effect supply and demand will probably have to migrate to shared platforms to comply with a new regulation on market abuse, which will capture much of the carbon market from 2016.

Power generators must report any unplanned outages at plants with a capacity of 100MW or more under an EU regulation on wholesale energy market integrity and transparency (REMIT).

Often this information is published on a generators’ own dedicated website. But at a hearing on Wednesday, staff tasked with drafting the technical standards for the market abuse regulation (MAR) think this type of reporting would be insufficient.

A large amount of generation capacity going off line could in theory increase demand for carbon permits, if a more heavily polluting source of generation was brought in to cover the missing capacity. This is why disclosure is needed.

The European Securities and Markets Authority (ESMA) said in its consultation paper for the market abuse regulation that company websites cannot be considered “proper public disclosure”, and only specific platforms would qualify such as operated by exchanges or system operators.

“We need to have mechanisms that are able to disseminate. If mechanisms under REMIT exist that are able to reach this outcome, they are fine. If they are obscure, linked to information that can or cannot be published, that we have to check when was the timing, investors or news disseminators have to surf all the websites of the potential companies, this will not work,” said Nicoletta Giusto, an official from Italian financial regulator Consob, who is a member of ESMA market integrity standing committee.

Different interpretations

An official at Norwegian energy company Statoil was critical that two authorities leading work on the standards for the regulations – the Agency for Cooperation of Energy Regulators and ESMA – have different views on what is considered sufficient in terms of inside information disclosure.

“It’s clear that we might have a different feeling (compared with ACER), we are used to deal with the issue of insider and confidential information, anomalies in the trading, and what we have to avoid at all prices is that the market is trading in the darkness,” said Giusto.

But a regulatory source from an energy company stressed that the EU ETS and financial markets work in different ways.

“ACER and ESMA are coming from different directions. In financial markets you are used to private persons investing in something, that need to be protected. In energy markets [there are] only professional players,” he said. “If you actually talk to emissions allowance traders they are saying the biggest source for inside information is anyway not covered, which is the European Commission. What is really driving the market is political and regulatory decisions. Emission allowance traders don’t really look if an installation is going out.” Silvia Molteni