Unfair practices in the German electricity market? Regulator investigates allegations

Germany’s network regulator has stepped up its investigation into potential unfair practices in the electricity market. Concerns center on allegations that information about the state of the system balance is being used to gain an advantage in intraday trading.

The allegations concern information that transmission system operators provide to selected companies to help maintain the balance between supply and demand in the power system. Information about imbalances in the German grid is not published in real time, and some traders with privileged access to this information have allegedly used it, or are using it, to gain an advantage in the intraday market, five sources told Montel.

“We are intensively investigating whether any conduct relevant under criminal law has taken place,” BNetzA spokesperson Fiete Wulff told Montel.

Germany’s network regulator (BNetzA) acknowledged that this information could theoretically be used to gain an informational advantage in the intraday market. However, that does not necessarily mean it always constitutes inside information, BNetzA added.

BNetzA said it had never received any allegation specifically targeting a single company and substantiating this type of market abuse. It added that there are many situations in which information about the activation of balancing services (SVR) offers no advantage over publicly available information.

Around 30-40 companies in Germany are qualified to provide balancing services. Only one of them, Mannheim-based MVV, publishes the signal it receives from transmission system operators to activate balancing services. The company publishes this information to avoid gaining an unfair advantage over its competitors and to prevent breaches of the rules against insider trading set out in the REMIT regulation.

The other companies also stressed to Montel that they comply with the law. Some said they had introduced internal barriers that effectively prevent their trading departments from gaining an unfair advantage.

BNetzA has the authority to verify these assurances and request information from transmission system operators that is not publicly available. The regulator has been looking into suspicions of misuse of this information since at least 2019, but stepped up its investigation in the summer and requested additional data from transmission system operators. It added that it is not yet able to prove that a criminal offence has occurred.

“Not everything that could theoretically constitute a breach is actually a breach in an individual case. We have to investigate every case very carefully and substantiate it thoroughly. That is what we are working on,” BNetzA said.

BNetzA’s department responsible for monitoring compliance with the REMIT regulation, which protects market integrity, will add another employee from January, bringing its total staff to 17.