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Neas Energy pays fine for manipulation on the intraday electricity market

Dato: 15.01.2019 ·

The energy company Neas Energy A/S (Neas) has accepted to pay a fine for participating in market manipulation on a part of the Nordic wholesale electricity market during 2015.

The Danish State Prosecutor for Serious Economic and International Crime has charged Neas with a fine of 150,000 DKK (approximately 20,000 euros). Further, the revenue obtained by company through the market manipulation has been confiscated. The revenue amounts to 3,000 DKK (approximately 400 euros).  Consequently, Neas has paid a total of 153,000 DKK (approximately 20,400 euros) for four counts of market manipulation.

This is the second instance within a short period of time that the State Prosecutor issues a fine to an energy company following a transfer of a case from The Danish Utility Regulator due to a suspicion of market manipulation. 

The Danish Utility Regulator transferred the case to the State Prosecutor for Serious Economic and International Crime in March 2018 due to a suspicion that Neas had breached the prohibition of market manipulation in Article 5 of the EU Regulation on Wholesale Energy Market Integrity and Transparency (REMIT).

The case concerns so-called capacity hoarding, where Neas hoarded capacity on the interconnectors for electricity by trading with itself. Consequently, Neas managed to exclude other market participants from trading between bidding zones and thereby hampering competition. Neas’ trades led to or were likely to lead to the creation of misleading and/or artificial prices on the intraday wholesale electricity market.

Carsten Smidt, Director General at the Danish Utility Regulator, notes that REMIT contributes to more efficient wholesale energy markets and that an infringement therefore also has consequences:

"Market manipulation is a serious violation of the REMIT Regulation. Neas’ trading behavior has limited the functioning of the market and this is detrimental to competition".

As a potential violation of the prohibition on market manipulation in REMIT, capacity hoarding is subject to great attention by the energy and supply regulators in Europe and by market participants.

"This is the second case of capacity hoarding, in which an energy company agrees to pay a fine for its trading behavior. Thus, we tie the loop on several years of work with yet another finding that capacity hoarding potentially constitutes market manipulation and thus is punishable. This can hopefully contribute to a further clarification of what the REMIT Regulation allows", Carsten Smidt concludes.


Fact file

A. The REMIT Regulation’s definition of and prohibition of market manipulation (excerpts):

Article 2

Definitions

For the purposes of this Regulation the following definitions shall apply:

[…]

2) ‘market manipulation’ means: :

a) entering into any transaction or issuing any order to trade in wholesale energy products which:

(i) gives, or is likely to give, false or misleading signals as to the supply of, demand for, or price of wholesale energy products;

(ii) secures or attempts to secure, by a person, or persons acting in collaboration, the price of one or several wholesale energy products at an artificial level, unless the person who entered into the transaction or issued the order to trade establishes that his reasons for doing so are legitimate and that that transaction or order to trade conforms to accepted market practices on the wholesale energy market concerned; or

(iii) employs or attempts to employ a fictitious device or any other form of deception or contrivance which gives, or is likely to give, false or misleading signals regarding the supply of, demand for, or price of wholesale energy products;            

[…]

Article 5

Prohibition of market manipulation

Any engagement in, or attempt to engage in, market manipulation on wholesale energy markets shall be prohibited.

B. The counts of market manipulation are as follows (DURs translation from the fixed penalty-notice issued by the State Prosecutor for Serious Economic and International Crime):

1. On 3 January 2015 at 3.22 PM in relation to the product PH-20150104-02 on Nord Pool’s intraday market, Elbas, for delivery on 4 January 2015 from 1:00 AM to 2:00 AM, carrying out a trade with itself as counterpart without a genuine need through buying 98 MWh in bidding zone SE4 from bidding zone DK1, whereby all the available transmission capacity on the interconnector between bidding zone DK2 to SE4 was occupied. This hindered sale orders in bidding zones DK1 and DK2 from being matched with buy orders in bidding zones SE and FI until approx. 11:44 PM. Neas’ first internal trade created or was likely to create a price difference between the bidding zones.

3. On 11 April 2015 at 4:27 PM in relation to the product PH-20150412-04 on Nord Pool’s intraday market, Elbas, for delivery on 12 April 2015 from 3:00 AM to 4:00 AM, carrying out a trade with itself as counterpart without a genuine need through buying 133.4 MWh in bidding zone DK2 from bidding zone DK1, whereby all the available transmission capacity on the interconnector between bidding zone DK1 and DK2 was occupied. This hindered sale orders in bidding zone DK1 from being matched with buy orders in bidding zone DK2 and the rest of the Nordic and Baltics (except NO3 and NO4). Neas’ internal trade created or was likely to create a price difference between the bidding zones.

5. On 16 September 2015 at 6:57 AM in relation to the product PH-20150916-14 on Nord Pool’s intraday market, Elbas, for delivery on 16 September 2015 from 1:00 PM to 2:00 PM, carrying out a trade with itself as counterpart without a genuine need through buying 135 MWh in bidding zone SE3 from bidding zone DK1, whereby all the available transmission capacity on the interconnector from bidding zone DK1 to bidding zone SE3 was occupied. This hindered sale orders in bidding zone DK1 from being matched with buy orders in bidding zones DK2 and SE. Neas’ internal trade created or was likely to create a price difference between the bidding zones. .

7. On 29 September 2015 at 2:01 PM in relation to the product PH-20150930-08 on Nord Pool’s intraday market, Elbas, for delivery on 20 September 2015 from 7:00 AM to 8:00 AM, carrying out a trade with itself as counterpart without a genuine need through buying 150 MWh from bidding zone DK2 from bidding zone DK1, whereby all the available transmission capacity on the interconnector from bidding zone DK1 to bidding zone DK2 was occupied. This hindered sale orders in bidding zone DK1 from being matched with buy orders in bidding zones DK2, NO, SE and DE until 5:46 AM, where Neas carried out a trade with itself, buying 125.7 MWh from bidding zone DK1 from bidding zone DK2. Neas’ first internal trade created or was likely to create a price difference between the bidding zones.

 

Background 

Read the fixed penalty-notice issued by the State Prosecutor for Serious Economic and International Crime (in Danish)

Read the Danish Utility Regulator’s (DUR) press release on the finalisation of the first case transfered by DUR to the State Prosecutor for Serious Economic and International Crime

Read ACER’s Guidance Note on capacity hoarding

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