Eneco Energy Trade takes measures following ACM’s investigation into an incorrect market order
Energy trader Eneco Energy Trade (EET) has made commitments to the Netherlands Authority for Consumers and Markets (ACM) regarding measures aimed at reducing the likelihood of incorrect market orders, as well as taking action more quickly in the future if an error does happen. In addition, EET will pay back an amount of 2.4 million euros, which the company had earned too much because of errors. EET’s commitment was prompted by an investigation conducted by ACM, which revealed that EET on 7 March 2022 made a typing error in a market order on the wholesale market for natural gas, and had failed to communicate about this error.
This typing error occurred during a balancing action on 7 March 2022 by GTS, the Dutch transmission system operator for natural gas. ACM’s investigation revealed that EET did discover the typing error straight away, but that the company subsequently failed to take any action and, for example, failed to notify other market participants that too high a price was offered due to a typing error. As EET did not take any action, other market participants offered natural gas at similarly high prices during a subsequent balancing action. ACM’s investigation showed that EET then also offered natural gas at high prices. EET thus benefitted as a result of these high prices in two balancing actions. Following ACM’s investigation, EET made commitments regarding measures aimed at preventing errors in the future, and paying back the amount of 2.4 million euros, which the company had earned too much because of the typing error. It is important that market participants take preventative measures, and to have procedures in place for correcting errors and for eliminating incorrect or misleading signals to the market. It is also important that, at the very least, market participants do not earn any money from such errors. That is why ACM is pleased that EET has made these commitments, and calls on other market participants to take similar measures.
What was this case about?
On 7 March 2022, the wholesale market for natural gas was extremely volatile because of the Russian invasion of Ukraine and the scarcely filled natural-gas storage facilities. On that particular day, an EET market trader added an extra 0 to the price of an offer during a balancing action of GTS. As a result of the typing error, 500 MWh of natural gas was offered on the natural-gas market at 2,450 euros per MWh, whereas it should have been 245 euros. As a result, GTS paid ten times too much for these 500 MWh of natural gas. GTS is the Dutch transmission system operator for natural gas. During the balancing action on 7 March 2022, GTS needed to buy extra natural gas in a short amount of time in order to ensure that the volume of natural gas in the gas network remained balanced. During balancing actions, GTS buys natural gas at the price for which natural gas is offered on the natural-gas exchange of ICE Endex at that particular point in time. GTS passes these costs on to market participants that, at the time, caused the system imbalance. EET will now pay GTS back the amount it unjustly received as a result of the error made on 7 March. GTS will subsequently distribute this money among the market participants that paid too high a price that day. GTS expects to make these payments in September 2023.
Incorrect orders may constitute market manipulation
ACM enforces compliance with the rules on market transparency and integrity on the wholesale markets for electricity and natural gas laid down in the EU Regulation on Wholesale Energy Market Integrity and Transparency (REMIT). REMIT stipulates, among other rules, that market participants are prohibited from trading with inside information, and also that market manipulation is banned. Submitting an order that sends an incorrect or misleading price signal falls under the definition of market manipulation. ACM believes it is important that traders on the wholesale markets take measures aimed at preventing incorrect orders. If, nevertheless, such an order does get submitted, market participants must ensure that the error is discovered quickly, and must notify the market thereof. If a market participant fails to take any measures aimed at preventing incorrect orders and/or fails to respond properly to incorrect orders, ACM can launch an investigation and, if necessary, take enforcement action.