Shell Energy Europe Ltd

Transcription

1 Shell Energy Europe Ltd Via 80 Strand London WC2R 0ZA United Kingdom Tel: July 2012 ACER Public Consultation Paper on Recommendations to the European Commission as regards the records of wholesale energy market transactions tions according to REMIT Shell Energy Europe Ltd (SEEL) would like to thank ACER for the opportunity to respond to the issues raised in this consultation paper. Headquartered in London, (SEEL) coordinates Shell s European gas, power and C02 marketing and trading business across 14 offices around Europe. Full details of our response and views can be found in Appendix 1 (see attached). We trust that you find these comments useful. To the extent that you have any questions or require further clarification, in the first instance please contact my colleagues Simon Smith (Global Monitoring & Surveillance Lead) on or Marsha La Pierre (Senior Compliance Policy Advisor) on Yours sincerely Amrik Bal Regulatory and Commercial Affairs Manager, Shell International Trading and Shipping Company Limited cc Simon.smith@shell.com Marsha.La-Pierre@shell.com Date:

2 Appendix 1 Question 1: 1 Do you agree with the proposed definitions? If not, please indicate alternative proposals. The proposed definitions should be consistent with their use elsewhere. There are a number of areas where this appears not to be the case, eg. it would be helpful if definitions such as spot market and an organized market place were consistent with those contained in MFID. Aside from this comment, we wonder about the definition of supply in particular, which is worded as: Supply means the sale, including resale, of electricity or natural gas, including LNG, where delivery is in the Union As written, the above would appear capable of including LNG cargoes for delivery to EU (unless LNG is not considered natural gas for the purposes of this definition?). LNG is not specifically mentioned in the definition of wholesale energy products under Article 2(4) of REMIT and cargoes do not form part of the wholesale supply picture that is fulfilled by the requirements to report Regulated Information relating to the capacity and use of LNG facilities. Shell seeks clarity that LNG cargoes are not intended to be caught. Shell sees no benefit in reporting confirms as part of lifecycle events. If both parties are reporting the transaction this serves no purpose and introduces unnecessary costs for market participant to fulfil this requirement. Question 2: 2 What are your views regarding the details to be included in the records of transactions as foreseen in Annex II? Do you agree that a distinction tion should be made between standardised and non- standardised contracts? Do you agree with the proposal on the unique identifier for market participants? The meaning and intention of many of the fields are not clear; to a large degree they may not exist in market participants ETRMs. It would help to split out data required to support the reporting of transactions from data required to support the recording of orders. It is appropriate to distinguish between standardised and non-standardised contracts. We are also supportive of the proposal regarding unique identifiers for market participants. Our preference would be for the Legal Entity Identifier (LEI) to be used as an international standard as soon as available. Question 3: 3 Do you agree with the proposed way forward to collect orders to trade from organised market places, i.e. energy exchanges and broker platforms? Do you think that the proposed fields in Annex II.1 will be sufficient to capture the specificities of orders, in particular as regards r orders for auctions? We agree with the proposal to collect orders to trade from organized market operators. The requirement to report should be limited to standardised transactions traded on organized markets. We disagree with the statement valid orders to trade are captured and stored in the market participant s energy trading and risk management software. While this comment may be true of organised market operators, it is not true of market participants who do not record orders in their ETRM systems. Any requirement for the latter to do so would cause them to incur disproportionate costs and create significant difficulties for market participants. Question 4: 4 Do you agree with the proposed way forward concerning the collection of transactions tions in non- standardised contracts? Please indicate your view on the proposed records of transactions as foreseen in Annex II.2, in particular on the fields considered mandatory. The reporting of transactions in non-standardised contracts is a potential concern as it could create a disproportionate burden on firms with regards to term contracts and retail contracts that contain price and volume optionality. Non-standardised contracts tend to be a relatively low proportion of total contract numbers

3 in the wholesale energy markets. For that reason, we think there is merit in a recommendation for firms to report the numbers of non-standardised transactions and volumes once a year. Shell sees no benefit in any requirement to submit contracts to the Agency. If both parties are reporting transactions no purpose is served other than an unnecessary increase in costs for market participants (to fulfil this requirement). Question 5: 5 Please indicate your views on the proposed collection of scheduling/nomination information. Should there be a separate Annex II.3 for the collection of scheduling/nomination data through TSOs or third parties delegated by TSOs? While not convinced of the value in reporting this information, to the extent that this data needs to be reported, we would favour it done via TSOs. In our view it would help to clarify the requirements for transactions and orders if the notification and scheduling information was split into a separate annex. The use of a third party such as a TSO raises the issue of legal obligations and liabilities. It should be the case that a party s reporting obligations are deemed to have been met once the information has been forwarded to a third party, in this case a TSO. Subsequent failures or delays in providing this information to ACER should be the responsibility of the TSO. Question 6: 6 What are your views on the above-mentioned list of contracts according to Article 8(2)(a) of the Regulation (Annex III)? Which further wholesale energy y products should be covered? Do you agree that the list of contracts in Annex III should be kept rather general? Do you agree that the Agency should establish and maintain an updated list of wholesale energy contracts admitted to trading on organised market places similar to ESMA s MiFID database? What are your views on the idea of developing a product taxonomy and make the reporting obligation of standardised contracts dependent from the recording in the Agency s list of specified wholesale energy contracts? The list of contracts in Annex III is generally satisfactory but: with regard to point (6) that LNG long-term contracts (and physical cargoes lifted thereunder) should not be regarded as natural gas for the purposes of Annex III. In our view the requirements to report Regulated Information relating to the capacity and use of LNG facilities is sufficient to provide reliable supply information regarding LNG; and assumes point (7) is intended to mean points (4) to (10) of section C Article 1 of Directive 2004/39/EC (MiFID)? If so, it is a catch all and is far too loosely defined. Any other commodity contract Including other derivative instruments which are not caught by of Directive 2004/39/EC will include all manner of commodity contracts and derivatives which have no relation and no bearing on the wholesale power and gas markets. As written it can include for example, metals, soft commodities and crude oil and refined products. This should be re-drafted in line with the intention and scope of REMIT to clarify that its application is only to wholesale power and gas contracts which are not caught by (1) to (6) above and derivative contracts which have power and gas for delivery in the EU as their underlying subject matter and which are not caught by MiFID. Shell considers that Annex III (7) once accurately re-drafted to reflect the intention and scope of REMIT removes the need for any additional wholesale energy products to be included. We also agree that the list of contacts in Annex III should be kept fairly general. It would be helpful if ACER were to maintain a list of contracts admitted to trading on organized market places. ACER must, however, give market participants sufficient time to adjust their systems and processes when new contracts become reportable under REMIT.

4 Product taxonomy would be useful. However, ACER should be aware that market participants are unlikely to be able to incorporate this functionality into their ETRM systems easily and, therefore, there should be no reporting obligations placed on market participants in this regard. Question 7: 7 Which of the three options listed above would you consider being the most appropriate concerning the de minimis threshold for the reporting of wholesale energy transactions? In case you consider a de minimis threshold necessary, do you consider that a threshold of 2 MW as foreseen in Option B is an appropriate threshold for small producers? Please specify your reasons. We have a preference for Option A, principally due to a desire to keep the regulatory burden for legitimately smaller market participants to a minimum. That said, we would note that the use of thresholds is more relevant to the electricity market and therefore wonder whether thresholds per se should be considered in the context of gas? Question 8: 8 Are there alternative options that could complement or replace the three listed above? We have not yet indentified any plausible alternatives. Question 9: 9 Do you agree with the proposed approach of a mandatory reporting of transactions in standardised contracts through RRMs? We agree that it is sensible for RRMs to report on standardised contracts. Furthermore, we also support moves designed to avoid any double reporting of contracts under REMIT, EMIR and MiFID. Question 10: Do you believe the Commission through the implementing acts or the Agency when registering RRMs should adopt one single standardised trade and process data format for different classes of data (pre- trade/execution/post-trade data) to facilitate reporting and to increase standardisation in the market? Should this issue be left to the Commission or to the Agency to define? Moves to standardise the process and formats for transaction reporting are sensible, especially for standardised contracts traded organized market places and reportable by RRMs. However, such an approach should not be mandated with regards to non-standardised contracts. Question 11: Do you agree that market participants should be eligible to become RRMs themselves if they fulfil the relevant organisational requirements? If they fulfil the relevant organisational requirements, market participants should be eligible to become RRMs themselves. Question 12: In your view, should a distinction be made between transactions in standardised and non- standardised contracts and reporting of the latter ones is done directly to the Agency on a monthly basis? A distinction needs to be made between transactions in standardized and non-standardised contracts, with the latter being directly reportable to the Agency. Information on non-standardised transactions should be collected as set out in the answer to Question 4. Question 13: : In I view of developments in EU financial market legislation, would you agree with the proposed approach for the avoidance of double reporting? Double reporting should be avoided. However, we are concerned about the intentions of the provision that where a substantial part of the REMIT data requirements is not met under EMIR or MiFID, RRMs should be required to report the complete data set directly to the Agency. Many firms with mixed portfolios will have a very substantial amount of transactions which are not reported under EMIR or MiFID but which are still only a small part of their overall portfolios, the bulk of which will be

5 reportable under EMIR or MiFID. In such circumstances, we assume that the intention is not for all the firms transactions to be reportable to ACER? This point needs to be clarified. Question 14: Do you agree with the proposed approach concerning reporting channels? We support the proposed approach in principle. However, the use of third party RRMs has two aspects to it that need to be clarified. Firstly, the use of such mechanisms should not neccesarily be mandatory for market participants willing and able to report their own data (by registering as a RRM). Secondly, the governance and contractual relationship between a firm and a RRM, covering issues such as service levels and liabilities need to be clear. Question 15: : In I your view, how much time would it take to implement the above-mentioned organisational requirements for reporting channels? c This is a difficult question to answer with any degree of precision but a period of between twelve to twenty-four months would seem likely. Question 16: Do you agree with this approach of reporting inside and transparency information? We would make two points in response to this question. Firstly, we would stress the need to differentiate between fundamental data and inside information. The former is required to ensure competitive market structure and day-to-day operation, while the latter is required to guard against anti-competitive activity. Secondly, it would be unhelpful from a cost perspective to require investment where it is not required. In particular, we would urge ACER to consider any proposals (for direct reporting) against the background of whether the required information is already publically available elsewhere? Question 17: Please P indicate your views on the proposed way forward on the collection of regulated information. We would only reiterate our views regarding the need to avoid a costly investment in the duplication of information provision. To ensure that this does not happen, Shell would support moves that first sought to identify and consolidate existing sources of the required information. Question 18: Do you agree with the proposed approach for the reporting of regulated information? Please indicate your view on the proposed mandatory reporting of regulated information through RIS and transparency platforms. Should there remain at least one reporting channel for market participants to report directly to the Agency? The establishment of national or regional platforms could act as a vital back-stop mechanism to ensure compliance with reporting obligations; this may be particularly valuable for smaller firms. However, those participants who can make their own and separate arrangements should be allowed to do so, especially if they view the question of legal liabilities an insurmountable issue. ACER should therefore at least gain experience of this flexible approach prior to mandating the use of RISs. Question 19: The recommendation does not foresee any threshold for the reporting of regulated information. Please indicate whether, and if so why, you consider a reporting threshold for regulated information necessary. It is not clear why there should be new requirements imposed for the publication of such information. Rather, the obligations with regards to fundamental data should be in line with the requirements of wider and broader legislation, eg. the Third Energy Package. Question 20: What is your view on the proposed timing and form of reporting? Our inititial view is to support a proposal for reporrting delay of two days based on electronic reporting (in normal circumstances).