UK: Ofgem's new powers to investigate and enforce breaches of REMIT

• Draft Order published which will grant Ofgem powers to investigate and enforce breaches of the European Regulation on wholesale Energy Markets Integrity and Transparency (REMIT).
• Ofgem issues Consultation on its proposed approach to exercising its new powers, including its new power to impose unlimited financial penalties for breaches of REMIT.
• Launch of Ofgem Call for Evidence on pricing benchmarks in gas and electricity markets.    

On 6 June 2013, the Department of Energy and Climate Change (DECC) laid a draft Order (SI 2013/1389) before Parliament, which will grant Ofgem new powers to investigate and enforce breaches of  Regulation (EU) No 1227/2011 of the European Parliament and of the Council of 25 October 2011 on wholesale energy market integrity and transparency (REMIT).  Subject to the Parliamentary process, the Order will come into force on 29 June 2013.

The Order will also impose an obligation on market participants and persons professionally arranging transactions on wholesale energy markets (Regulated Persons) to take reasonable steps to ensure that records of telephone conversations and electronic communications relating to wholesale energy product transactions are kept. Electronic communications include email, faxes and instant message communications.

The powers granted to Ofgem under the Order constitute a significant augmentation of the role of Ofgem as an enforcement body in the wholesale energy market and are closely modelled on the powers available to the financial services regulators under the Financial Services and Markets Act 2000.  They include powers:

• to require Regulated Persons, and others, to provide Ofgem with information to enable it to monitor compliance with REMIT and investigate suspected breaches
• to levy unlimited financial penalties against, or publicly censure, those in breach of REMIT or the requirement to maintain records of relevant communications
• to require restitutionary damages to be paid in respect of profits accrued from, or losses suffered as a result of, a failure to comply with a REMIT requirement
• to apply for a warrant to enter premises; and
• to apply for non-cooperative individuals to be held in contempt.

As required under the Order, Ofgem has issued a Consultation on its proposed approach to exercising its new monitoring, investigatory and enforcement powers.

Linked to the Consultation, and following recent controversy surrounding price reporting in the gas markets, Ofgem has also issued a Call for Evidence on pricing benchmarks in gas and electricity markets.

Interested parties should consider responding to the Consultation by 29 August 2013 and to the Call for Evidence, which closes on 31 July 2013.

To read our fuller briefing, click here.