Obligation to Appoint a Representative under REMIT Begins on 8 November 2024

Certain changes introduced on 16 April 2024 under REMIT, which aims to ensure transparency in the energy market, will take effect as of 8 November 2024. In this article, we first provide an overview of REMIT, followed by a list of the recent regulatory changes and the key points that market participants supplying electricity to the European Union need to be aware of.

1. A Brief Overview of REMIT

REMIT, the Regulation on Wholesale Energy Market Integrity and Transparency (EU Regulation No. 1227/2011), entered into force on 28 December 2011. It was developed by the European Union (“EU”) to promote fair competition and prevent market manipulation within the energy markets. Targeting the electricity and natural gas markets, this regulation ensures that all participants in the energy sector adhere to principles of transparency.

The primary objective of REMIT is to ensure accurate price formation in the energy markets. Accordingly, it mandates that market participants disclose certain inside information related to their transactions. This requirement is intended to provide all market participants with equal and transparent access to information affecting price formation. Moreover, REMIT prohibits all activities that distort prices or market balance, such as market manipulation, fraud, and deceptive practices.

Additionally, market participants operating in the EU electricity and natural gas markets are required to register with the Agency for the Cooperation of Energy Regulators (“ACER”). The responsibility for REMIT compliance and monitoring is also entrusted to this administrative body, ACER.

2. Changes Made in 2024 and the Envisioned Obligations

With the recent amendments, gas and electricity storage activities are recognized as transactions requiring the disclosure of inside information and are now included within the scope of REMIT. Additionally, the regulation has been expanded to cover intermediaries who receive and transmit orders on behalf of market participants. These intermediaries are required to report any market-disruptive actions under REMIT.

It has been observed that market participants who conduct continuous energy trading through specific algorithms, with minimal human intervention, increase the risk of market manipulation. Consequently, those using such algorithms are now required to report such usage to ACER.

Furthermore, since REMIT-covered market activities occur across member states with different sanctioning systems and even non-EU countries, it was noted that states act reluctant to exercise jurisdiction in cases involving cross-border market-disruptive actions due to the international nature of such cases. To address this and prevent impunity, it has been proposed that ACER’s authority for oversight should be expanded. In this context, it has been regulated that while ACER will not have the power to impose direct fines, it may apply periodic penalty payments to ensure compliance with on-site inspection decisions and information requests made as part of cross-border investigations.

One of the most critical amendments with cross-border implications is related to the appointment of a representative. By 8 November 2024, market participants resident or established in a third country that enter into transactions which are required to be reported to ACER in accordance with Article 8(1) shall: (i) designate a representative in a Member State in which they are active; (ii) verify if they are already registered for REMIT purposes in that Member State; and (iii) if not already registered in the Member State where the representative is designated, register or change the registration to the Member State where they have designated their representative. This means that the registration and designation of a representative must be in the same Member State. In that context, by 8 November 2024, market participants shall notify the name, email address, postal address, and telephone number of their designated representative to ACER.

3. Impact of REMIT Amendments on Turkish Companies Engaged in Energy Trade with the EU

One of the most notable provisions of the REMIT amendments for Turkish companies is the obligation to appoint a representative. Turkish companies, which trade energy (electricity and natural gas) with the EU but do not have a physical presence within the EU, will be required to appoint a representative in the member states where they are actively trading by 8 November 2024.

In a notification sent by ACER to market participants on 25 September 2024, it was clarified that if a company is required to appoint a representative due to the absence of a corporate structure within the EU and is active in multiple member states, it will be sufficient for the company to choose one of those countries for registration and representative appointment.