The National Energy Regulatory Council of Lithuania (NERC) found that the market participant UAB Geros dujos engaged in market manipulation on the Lithuanian natural gas market breaching Article 5 of REMIT (EU Regulation on Wholesale Energy Market Integrity and Transparency).
NERC established that, during the first half of 2017 UAB Geros dujos engaged in a "marking the close" scheme by caring out illegal transactions on the last day of each month. The market participant inserted orders at the energy exchange with the minimum allowed volume at prices significantly different from the prevailing market prices. The orders gave false and misleading signals about the level of wholesale prices resulting into transactions that affected a reference price assessed by the energy exchange. By securing the reference price at an artificial level, the market participant extracted undue profits through some of its retail customers' contracts which were indexed to the reference price.
This breach of REMIT was sanctioned with a penalty of EUR 28,583, which corresponds to 7.5% of the market participant's annual revenue. UAB Geros dujos authorisation to carry out natural gas supply activity in Lithuania was terminated due to previous investigations from NERC. The decision can still be subject to appeal under national law by the market participant.
The European Union Agency for the Cooperation of Energy Regulators (ACER) followed closely the development of this case while under investigation by NERC, aiming to ensure a consistent application of REMIT across Europe. In 2018, the Spanish National Regulatory Authority for energy (CNMC) also fined two market participants for marking the reference period of several natural gas wholesale products for delivery in Spain.
"NERC expresses gratitude towards ACER's colleagues for the dedicated time and effort in supporting the investigation process, including the provided explanations, guidance and insights on the interpretation of REMIT provisions and for providing feedback with a spirit of cooperation", said Mrs Inga Žilienė, Chair of the NERC
The ACER Guidance provides examples of the various types of trading practices, which could constitute market manipulation under REMIT. The "marking the close" behaviour, which is relevant for this case, involves deliberately buying or selling wholesale energy products at the close of the market in an effort to alter the closing price of the wholesale energy product. This practice may take place on any individual trading day, but is particularly associated with dates such as index reference/valuation points.
For further information on NERC`s decision see here.
More information on manipulative behaviours can be found in the ACER Guidance here.