Finnish Regulator Rules That Fat Finger Firm Violated REMIT

Case Facts

Kinect's Trading Operations and the System Implementation Error

Kinect Energy AS operates as a market participant in Nordic wholesale electricity markets, trading electricity on Nord Pool based on agreements with wind farms located in Finland. The company's business model involves submitting daily bids for the Finnish bidding area to buy or sell the difference between electricity production and consumption and functioning as a net seller on windy days and a net buyer on low-wind days.

During 2023, Kinect transitioned to a new supplier of production forecasts for its wind farm portfolio to obtain more accurate weather data. Production forecasts (presumably via algorithms) were configured to transfer directly from the supplier's service to Kinect's trading system. Page four describes Kinect's production forecast process in more detail:

According to Kinect, its electricity production forecasts are mainly influenced by weather data. During 2023, Kinect switched to a new supplier of production forecasts for wind farms in order to obtain more accurate weather data for wind farms from that supplier and, as a result, more accurate production forecasts (‘implementation’). These production forecasts are transferred directly from the supplier's service to the trading system used by Kinect [for final 'human in the loop' review by trader's before submitting auction bids to the exchange].

On 22 November 2023, Kinect's IT team completed the implementation of the new forecasting service for an additional wind farm, and notified Kinect's traders that the implementation had been finalised.

Unfortunately for Kinect, the implementation contained a critical configuration error. Specifically, the production forecast data for the wind farm was multiplied by a factor of one thousand when transferred to Kinect's trading system. This error was not visible in the traders' active user interface view, which did not display detailed information regarding underlying bid calculations.

The Bid Submission and Trader Communication Breakdown

Trader 1, responsible for the Finnish bidding area, confirmed receipt of the IT team's implementation notification and prepared preliminary bids based on forecasts by checking production and consumption data in accordance with company procedures. These preliminary bids were submitted to Nord Pool before the new service implementation had been finalised for the wind farm.

On 23 November 2023, Trader 2, located at Trader 1's workspace, was responsible for finalising bids for that day. Trader 1 informed Trader 2 that preliminary forecasts had been prepared but did not specifically draw Trader 2's attention to the IT team's message regarding the new system implementation. When Trader 2 submitted the final bid to Nord Pool for delivery day 24 November 2023, Trader 2 was unaware of the new service implementation or that the configuration error affected production forecasts. Trader 2 relied on underlying factors of the preliminary bid prepared by Trader 1 and had no reason to suspect unexpected circumstances would affect bid size.

Kinect submitted its bid as a price-independent bid, meaning the bid applied uniformly across all price levels between the day-ahead market's minimum of -500 EUR and maximum of 4,000 EUR. The erroneous bid resulted in Kinect bidding an average of approximately 5,787 MW of electricity per hour for delivery day 24 November 2023. The incorrectly offered amount corresponded to roughly half of the total electricity sold on the day-ahead market in the Finnish bidding area that day.

Market Price Collapse – Kinect bid more electricity than it produced

According to data from Fingrid (Finland's transmission system operator), electricity production in Finland on 24 November 2023 averaged 10,500 MW. While Kinect's specific wind farm capacity was redacted from the Decision, the Energy Authority noted that the bid was physically impossible to fulfil i.e. Kinect bid more electricity than it had available to deliver.

The erroneous bid's exceptional size, offered independently of price, caused supply to clearly exceed demand for several hours. DA market prices for delivery day 24 November 2023 in the Finnish bidding area fell to -500 EUR/MWh (the regulatory minimum) for ten consecutive hours. The average price across all 24 hours was -203.40 EUR/MWh. The Energy Authority noted that negative average prices for an entire day are extremely rare in the Finnish bidding area, where negative prices typically amount to only a few euros.

Nord Pool’s Discovery of Kinect’s Erroneous Bids and Kinect’s Remediation Response

Nord Pool detected the erroneous bid at 12:27 CET on 23 November 2023, shortly after the DA market results became available. Nord Pool's operators identified abnormally low Finnish prices and located Kinect's bid when filtering for the Finnish bidding area. Nord Pool delayed preliminary approval of price calculations and initiated an Incident Committee conference call with other designated electricity market operators at 12:38 CET. Nord Pool proposed a price recalculation, but the other operators declined as the event was not covered by the operational rules. Nord Pool confirmed the calculation results at 12:48 CET, contacted Kinect at 12:50 CET, and published final auction results at 12:56 CET.

Kinect submitted a corrected bid at 14:10 CET and published an Urgent Market Message (UMM) at 13:29 CET disclosing the system error. Kinect held multiple discussions with Nord Pool requesting emergency measures to correct the error, but Nord Pool declined, stating the DA market auction was closed and no available means existed to reopen it.

Kinect began purchasing electricity on the intra-day market at 20:49 CET on 23 November 2023, ultimately purchasing approximately 98.4% of the erroneously offered electricity volume. The costs incurred by Kinect as a result of the incident were redacted from the Decision, but comprised of DA market sales costs, intra-day market purchase costs, and balance deviation pricing.

Simulation-Based Quantification of Market Impact

The Energy Authority's Simulation Analysis

To demonstrate price effects conclusively, the Energy Authority commissioned simulation analysis using the electricity market operators' simulation tool to model what DA market prices would likely have been without Kinect's erroneous bid. This methodology established counterfactual pricing through re-running the market clearing algorithm with the erroneous bid removed, enabling precise quantification of price distortion attributable to the manipulation.

Simulation Results: 251.58 EUR/MWh Price Distortion

The simulation determined that without Kinect's erroneous bid, the average price in the Finnish bidding area on 24 November 2023 would have been +48.18 EUR/MWh. The error therefore reduced the Finnish average price by approximately 251.58 EUR/MWh, a price swing from moderately positive pricing reflecting balanced supply-demand dynamics to severely negative pricing indicating artificial oversupply.

Cross-border spillover effects were also quantified. The error reduced average prices in the Swedish SE1 bidding area by an estimated 13.12 EUR/MWh and in the Swedish SE3 bidding area by an estimated 28.56 EUR/MWh, demonstrating systemic market contagion across interconnected Nordic electricity markets.

Parallels to Italian ARERA Market Manipulation Enforcement

The Finnish Energy Authority's use of simulation techniques are similar in principle to those employed by Italy's energy regulator ARERA in a recent market manipulation investigation and related market study (click here for RegTrail analysis of the market study). ARERA had commissioned similar counterfactual pricing analyses using market clearing simulation tools to quantify price distortions in cases involving suspected manipulation of Italian electricity markets, establishing objective evidence of artificial price formation that is difficult to contest.

This convergence in enforcement methodologies across Member State national regulatory authorities suggests emerging best practice for proving market manipulation in wholesale energy markets. Simulation-based counterfactual analysis provides several advantages:

1. Objective Evidence. Mathematical re-creation of market clearing absent the challenged bid eliminates speculation about what prices "would have been," replacing guesswork with algorithmic calculation.
2. Precise Quantification. Simulation establishes exact price deviation attributable to the erroneous bid, enabling proportionate penalty assessment calibrated to actual market harm.
3. Causation Demonstration. In complex markets with multiple participants and cross-border interactions, simulation isolates the specific effect of the challenged bid from other market factors.
4. Cross-Border Impact Visibility. Simulation across coupled markets reveals transnational effects that might not be apparent from examining individual bidding area results.

For compliance professionals, this nascent enforcement trend indicates that regulators possess and may increasingly deploy sophisticated analytical capabilities to prove manipulation. Internal compliance functions should anticipate that significant trading anomalies will be subject to similar quantitative scrutiny and should consider conducting parallel analyses when irregularities occur to assess potential regulatory exposure.

Legal Framework and Application of REMIT Market Manipulation against Kinect

REMIT's Market Manipulation Prohibition and Energy Authority’s Strict Liability Standard

The Energy Authority outlines legislative precedence in relation to the enforcement decision against Kinect on page 19 of the Decision:

Article 5 of Regulation (EU) 1227/2011 (REMIT) prohibits participation in market manipulation and attempts to manipulate wholesale energy markets.

Article 2(2)(a) defines market manipulation as "the execution of a transaction or the placing of an order to trade in wholesale energy products" where any of three criteria are satisfied:

1. The transaction or order "gives or is likely to give false or misleading signals as to the supply of, demand for, or price of wholesale energy products";
2. The transaction or order secures "one or more wholesale energy [products] at an artificial level, unless the person carrying out the transaction or placing the order demonstrates that his reasons for carrying out the transaction or placing the order are legitimate and that the transaction or order is in accordance with accepted market practices on the relevant wholesale energy market"; or
3. The transaction or order uses "false means or other fraudulent practices or arrangements."

While Kinect acknowledged on page 15 that it understood that it had breached REMIT Article 5, it positioned that any penalty (if any) should be either reduced or not issued given its actions were not intentional.

In its statements, Kinect acknowledges that it understands that a breach of Article 5 of the REMIT Regulation does not require intent, and therefore does not dispute that its actions formally meet the criteria for market manipulation set out in the REMIT Regulation with regard to the conduct described in Article 2(2)(a)(i) and (ii) of the REMIT Regulation. However, Kinect reiterates that its actions were not intentional or similar to those described in recitals 13 and 14 of the REMIT Regulation.

Energy Authority's Finding: Dual Violation of REMIT Article 2(2)(a)(i) and (ii)

The Energy Authority determined that Kinect's bid satisfied criteria in both subparagraphs (i) and (ii).

Article 2(2)(a)(i) - False or Misleading Signals. Kinect offered approximately 5,787 MW/h for sale on average, representing almost half of total supply in the Finnish area. Given Kinect's wind farm production capacity (which was redacted) and Finland's total electricity production averaged 10,500 MW, the Energy Authority concluded Kinect did not have capacity to produce the offered amount, making the bid inherently unrealistic and misleading.

The exceptionally large, price-independent sale offer meant purchase offers on the DA market were accepted for which no corresponding production capacity actually existed. This false supply signal distorted other market participants' trading decisions and undermined the fundamental principle that wholesale energy prices should reflect actual supply-demand interaction.

Article 2(2)(a)(ii) - Artificial Price Levels. The Energy Authority determined Kinect's bid secured day-ahead market prices at artificial levels. Prices fell to -500 EUR/MWh for ten consecutive hours which was a highly exceptional outcome. The 251.58 EUR/MWh price reduction from the simulated counterfactual analysis established that prices were set at levels fundamentally disconnected from actual supply-demand dynamics.

Article 2(2)(a)(ii) provides an exception where a person can demonstrate that reasons for the transaction are legitimate and the transaction conforms to accepted market practices. The Energy Authority found this exception non-applicable because:

• Kinect's bid was incorrect due to system error; and
• The size of the bid did not reflect Kinect’s true capacity to physically deliver.

Energy Authority’s Rejection of Kinect’s Intent-Based Defences

Kinect argued that because it had no financial gain and the error was unintentional, the matter should not constitute market manipulation. The Energy Authority explicitly rejected this defence.

The Energy Authority noted that unlike subparagraph (iii), subparagraphs (i) and (ii) of Article 2(2)(a) do not expressly refer to intent in their wording. The criteria in Article 2(2)(a)(i)-(iii) are independent - manipulation criteria may be met by fulfilling any one criterion. REMIT's purpose is to ensure consumers and market participants can rely on market integrity and that wholesale energy prices reflect supply-demand interaction.

The Energy Authority emphasised: "Even offers that are incorrect in nature can undermine market participants' confidence in the authenticity of price formation. Thus, an erroneous bid may also fulfil the criteria for market manipulation." Absence of intent to benefit does not prevent a bid from being considered manipulation under Article 5.

The Energy Authority’s interpretation establishes REMIT as a strict liability regime for market manipulation under Article 2(2)(a)(i) and (ii), where subjective intent is immaterial to liability determination. Market manipulation is determined by objective market effects rather than subjective intent.

Mitigating Circumstances are Irrelevant when determining Liability

The Energy Authority ruled that factors presented by Kinect including (i) impeccable track record, (ii) measures to limit the bid's impact (including significant intra-day purchases, UMM publication), (iii) lack of financial benefit, and (iv) consumer benefits from temporarily negative prices were not relevant when assessing whether market manipulation criteria were met or determining associated liability. These factors may impact sanction considerations but do not affect the threshold liability question.

This establishes a two-stage framework under Finnish law:

1. Liability determination based on the objective satisfaction of Article 2(2)(a) criteria, applying strict liability where intent is immaterial; and
2. Sanction determination considering broader equitable factors including intent, track record, remediation, and proportionality.

Divergence from Norwegian Regulator Precedent: The Vattenfall Decision

Kinect's defence points to a similar Vattenfall case with no associated fine

Kinect's strongest argument against receiving a penalty relied on a February 2025 decision by the Norwegian Energy Authority regarding an incorrect bid submitted by Vattenfall AB. According to Kinect's account, the Norwegian Authority found that Vattenfall's incorrect bid gave false or misleading signals about wholesale energy product prices, affected energy prices for almost every hour of the day, and caused significant imbalances. However, the Norwegian Authority did not impose a penalty based on its overall assessment.

The Norwegian decision identified three critical factors arguing against penalty imposition:

1. Immediate Market Notification. Vattenfall notified the market of the error without delay;
2. No Financial Benefit. Vattenfall did not benefit from the erroneous offer but instead incurred costs; and
3. Lack of Intent. Vattenfall had not acted intentionally or with aim of benefiting the company.

Kinect argued these same factors applied to its case noting that it published a UMM disclosing the error within hours, incurred substantial costs (nearly [redacted] EUR) rather than benefiting, and acted entirely without manipulative intent.

Energy Authority's Rejection of Vattenfall Precedent

The Energy Authority's decision to proceed with penalty enforcement despite factual parallels to the Vattenfall case represents a significant divergence in REMIT enforcement philosophy between two Nordic countries. While the Energy Authority's decision does not explicitly address the Vattenfall precedent in detail, the substantive analysis implicitly rejects Norway's approach.

Several factors may explain this divergence:

1. Severity of Risk Management Deficiencies. The Finnish Authority's detailed assessment of Kinect's control failures including absence of automated controls, manual controls, and change management practices may have revealed more severe organisational deficiencies than were present in Vattenfall's case. The Energy Authority's characterisation of Kinect's deficiencies as reflecting "general disregard" for risk management obligations suggests systemic inadequacy rather than isolated error.
2. Systemic Risk Considerations. The Energy Authority emphasised that Fingrid prepared to invoke emergency system operator powers to directly control production and consumption to ensure operational reliability. This suggests the Finnish incident presented more acute systemic risk to electricity system functioning than the Norwegian incident, potentially warranting a stronger enforcement response.
3. Enforcement Philosophy Differences. NRAs exercise discretion in REMIT enforcement within parameters established by the regulation but may adopt different enforcement philosophies. Norway's NVE, which operates under a local set of REMIT rules, may prioritise deterrence of intentional manipulation and view unintentional errors more leniently when immediately remediated, while Finland's Energy Authority may emphasise strict adherence to risk management standards regardless of intent to ensure market integrity and prevent systemic risks in interconnected markets.

Implications for Market Participants Operating Across Nordic Markets

The divergence between Norwegian and Finnish enforcement approaches creates compliance uncertainty for market participants operating across multiple Nordic jurisdictions. Entities trading in both Norwegian and Finnish bidding areas cannot rely on uniform treatment of unintentional trading errors, especially given Norway is a non EU Member State (European Economic Area [EEA] agreement equivalence and Economic Free Trade Association [EFTA] state) while Finland is an EU Member State. Consequently, REMIT implementation under Norway is transposed under local Norwegian law only (falls outside EU REMIT regulation) while Finland applies EU REMIT law directly. This fragmentation may undermine legal certainty and predictability which are core principles of EU single market functioning.

Market participants face heightened compliance risk when operating in jurisdictions with stricter enforcement standards. Compliance frameworks must be calibrated to satisfy requirements of the most stringent regulator in any jurisdiction where the entity operates, as reliance on more lenient approaches may provide false assurance.

Market participants expect that ACER, in any future REMIT guidance updates, may consider promoting greater consistency in REMIT enforcement across both EU Member States and EFTA states e.g. Iceland, Lichstein, and Norway which would enhance legal certainty while respecting national enforcement discretion. Until uniformity is mandated across Member States, firms should review and refine their risk frameworks accordingly.

Bid Accuracy Responsibility: Market Participants vs. NEMOs

Explicit Exclusion of Nord Pool's Conduct from the Investigation

The Energy Authority explicitly excluded Nord Pool's conduct as a NEMO from the investigation, despite Kinect's arguments that Nord Pool could and should have prevented the erroneous bid from being accepted. This exclusion establishes critical precedent regarding allocation of responsibility in European wholesale energy markets.

The Energy Authority reasoned that REMIT's market manipulation framework fundamentally targets market participants' own activity. According to Article 2(2)(a)'s wording, manipulation requires "the execution of a transaction" or "the placing of an order" by the market participant. The provision bases liability solely on offers under the market participant's control and responsibility. Market participants decide independently on transactions forming the basis for bids and on bid submissions reflecting actual transactions.

No Explicit NEMO Obligation to Verify Commercial Validity under EU regulations

The Energy Authority emphasised that EU electricity market regulation does not impose explicit obligations on NEMOs or electricity exchanges to verify the commercial validity of bids submitted to the market. NEMOs verify technical compliance with market rules (format, timing, data fields) but are not required to assess whether bids make commercial or economic sense.

This creates clear allocation of responsibility:

• Market Participants. Bear absolute responsibility for bid accuracy, including commercial reasonableness, physical feasibility, and conformity with actual trading intentions.
• NEMOs. Verify technical compliance and operate market coupling mechanisms, but function as neutral platforms rather than gatekeepers assessing bid validity.

Consequently, Kinect's arguments regarding Nord Pool's operations and possible impacts on the bid's market impact e.g. Nord Pool's decision not to take action when the erroneous error was identifed were deemed irrelevant when assessing whether market manipulation criteria were satisfied, as responsibility for bid accuracy lies with the bidder.

Nord Pool's Reasonability Check Tool: Available for Market Participants but Not Mandated to Use

Nord Pool offers its members a "Reasonability Check" service through the DA auction user interface enabling market participants to verify bids against previous trading days. This tool can flag bids that deviate significantly from historical patterns, alerting participants to potential errors before final submission.

According to Nord Pool's report to the Energy Authority, Kinect's erroneous bid was flagged and rejected by this Reasonability Check tool. However, the flag was removed at 11:46 CET on 23 November 2023, before the auction closed at 12:00 CET.

Nord Pool stated it has no visibility into whether Kinect actually utilised the Reasonability Check service or what other verification mechanisms Kinect had available through its software suppliers. Nord Pool's Day-ahead Market Regulations stipulate that members must ensure bids they submit are correct and valid. The Reasonability Check is offered as a service, not mandated to market participants as a pre-submission requirement.

Unanswered Questions Regarding the Reasonability Check Flag - Enhanced REMIT risk management

Several operational questions remain unresolved based on the enforcement case facts which have implications for market participants:

1. Why was the flag removed? Nord Pool did not provide public explanation for why the flag on Kinect's bid was removed before auction closure. Specifically, on page 12, Nord Pool acknowledged that "the incorrect bid was flagged in Nord Pool's Reasonability Check" however "the bid was not identified as incorrect before the aggregated bid books were submitted for price calculation. The incorrectness of the bid was only noticed after the day-ahead market price calculation, when the market results were available in the PMB system and Nord Pool's auction system." Possibilities include manual override by a Nord Pool operator, automatic removal based on algorithmic parameters, or system error.
2. Why was Kinect not contacted? Kinect noted that Nord Pool usually contacts bidders by telephone when bids differ significantly from previous bids but did not contact Kinect on 23 November 2023. Understanding whether this represents departure from standard practice is relevant for evaluating Nord Pool's operational procedures.
3. Should utilisation be mandatory? A policy question is whether REMIT or Capacity Allocation and Congestion Management (CACM) Regulation amendments should mandate that market participants utilise available verification tools before final bid submission, or whether NEMOs should implement harder controls that reject bids failing reasonability parameters.

While these questions fall outside market manipulation liability determination, they are relevant for systemic risk management and market infrastructure policy development.

Market Participants Cannot Rely on Exchanges to Monitor Bid Submission Accuracy

The Energy Authority's framework establishes that market participants cannot delegate responsibility for bid accuracy to exchanges or rely on NEMO verification systems as substitutes for internal controls. Available verification tools like Nord Pool's Reasonability Check function act as advisory services that sophisticated participants should utilise, but their existence does not transfer responsibility from participant to exchange.

Assessment of Risk Management Deficiencies and Heightened Standards

Standard of Care for Wholesale Market Participants

The Energy Authority established that in preparing and submitting bids and executing transactions in wholesale energy markets, market participants must ensure they maintain methods and systems that prevent market abuse and maintain confidence in the wholesale energy market.

Based on the investigative record, the Energy Authority concluded that at the time of the error, Kinect's risk management practices relating to trading were not organised in a manner meeting general requirements of due diligence in wholesale market trading. The assessment considered the nature of legal rights and interests protected by REMIT (market integrity, consumer protection, fair price formation) and general effects on the electricity system linked to wholesale market trading accuracy.

Critically, the Energy Authority determined that the error and its effects could have been prevented by following normal processes related to wholesale market trading and taking reasonable measures, despite the system implementation error. This finding is significant in that even accepting that a technical configuration error occurred, normal wholesale market processes and reasonable measures should have caught the error before market submission. The technical glitch did not excuse failure to prevent market manipulation.

Kinect’s Systematic Control Failures

The Energy Authority identified three categories of fundamental control deficiencies that formed the basis for its assessment that Kinect failed to meet due diligence standards:

1. Lack of Automated Controls for Incorrect Bids

Kinect's trading system lacked automated safeguards to flag bids deviating drastically from historical patterns, physical production capacity, reasonable market expectations, or price-quantity relationships. Programmatic controls that would automatically prevent or flag obviously erroneous bids before exchange submission were absent.

For wholesale energy market participants, automated controls may include:

• Production capacity validation. Automatic rejection of sale bids exceeding registered production capacity by specified thresholds;
• Historical pattern comparison. Flagging bids that deviate significantly e.g. >200% from average bid sizes over recent trading periods;
• Cross-bidding zone reasonableness checks. Alerting when bids would likely create price differentials exceeding typical ranges between interconnected areas;
• Price-independent bid scrutiny. Heightened review requirements for bids offered at all prices, given their potential for extreme market impact if erroneous.

2. Lack of Manual Controls for Incorrect Bids

Even if automated systems failed, no adequate manual review procedures existed to catch the error before market submission. Human verification processes requiring traders to review bid parameters before final submission, cross-check against production capacity, utilise exchange system checks like Nord Pool's Reasonability Check tool, or implement "four-eyes principles" for significant bids were not in place or not effectively implemented.

Manual control best practices may include:

• Pre-submission verification checklists. Mandatory trader completion of validation steps including visual review of bid quantities, confirmation of underlying data sources, and comparison to expected values;
• Four-eyes review. Independent review by second trader or supervisor for bids exceeding materiality thresholds;
• Utilisation of exchange verification tools. Mandatory use of Nord Pool's Reasonability Check or equivalent services before finalising submissions;
• Documentation requirements. Recording basis for bids and verification steps performed to create audit trail.

3. Lack of Established Practices for IT System Changes

The system implementation causing the error was conducted without adequate safeguards. Formalised change management protocols for trading system modifications, testing requirements before production deployment, communication and verification procedures when systems affecting trading are altered, and controls ensuring compliance with change management procedures were absent or ineffective.

Change management best practices for trading systems may include:

• Formal change request and approval processes. Documented scope, testing plan, rollback procedures, and approvals from IT, trading, and risk management functions;
• Testing in non-production environments. Validation of calculation accuracy using historical data before deploying to production;
• Phased implementation. Pilot testing on limited portfolios or shadow mode operation before full-scale deployment;
• Communication protocols. Ensuring traders receive, acknowledge, and understand the implications of system changes;
• Post-implementation verification. Reconciliation comparing system outputs to expected values for specified period after deployment;
• Trading restrictions. Prohibiting traders from finalising bids based on newly implemented systems until verification procedures confirm accuracy.

The "General Disregard" Finding and Its Legal Significance

The Energy Authority assessed that when viewing the event as a whole, the lack of automatic and manual controls for incorrect bids and the lack of established practices for implementing IT system changes and ensuring compliance "reflect a general disregard for the possible consequences of placing an incorrectly sized bid on the market."

The use of "general disregard" is legally significant. Within the negligence standard under Finnish law, 'disregard' characterises conduct at the more culpable end of the negligence spectrum, suggesting awareness of obligations but systematic failure to implement adequate measures to satisfy them. This formulation distinguishes Kinect's conduct from simple inadvertent error or isolated oversight. Instead, the Energy Authority characterised Kinect’s deficiencies as systemic rather than a single point of failure.

Under Section 16 of the Finnish Supervision Act, penalty payments may be imposed on persons who "intentionally or negligently" violate REMIT prohibitions. The "general disregard" characterisation suggests the Energy Authority viewed Kinect's conduct as falling against the negligence standard, potentially at the more culpable end of the negligence spectrum approaching recklessness.

Heightened Standards for "Global Operators"

The Energy Authority stated that these omissions indicate that "Kinect acted as a whole, showing disregard for the level of care and internal risk management that can reasonably be expected from a global operator and electricity market participant such as Kinect."

This applies a heightened standard based on Kinect's profile as a global operator with years of market experience and sophisticated commercial activities. The Energy Authority's implicit message is that risk management practices must be commensurate with organisational scale, market experience, and potential systemic impact.

Reasonable expectations for such an entity include professional-grade risk management systems, robust internal controls, formal change management, multiple bid verification layers, and adequate resources devoted to compliance.

This enforcement decision may potentially establish a tiered compliance expectation framework where larger, more experienced, internationally active market participants could face heightened scrutiny and more demanding risk management standards than smaller, local, or newer entrants might face.

Avoidance of Catastrophic Electricity System Failure

The Energy Authority noted that although the incident was a one-off event, it could have had serious practical implications for electricity system functioning. Due to the bid's market impact, Fingrid prepared to exercise system operator emergency powers under EU electricity market regulation and Section 45 of the Finnish Electricity Market Act, including directly controlling production and consumption to ensure operational reliability.

These extreme measures were avoided mainly due to Kinect's solvency (financial capacity to purchase corrective electricity on the intra-day market incurring significant costs (actual amount was redacted) and cooperation of other market participants willing to trade on the intra-day market.

The Energy Authority emphasised that avoidance of catastrophic system failure was not due to Kinect's risk management but rather to external factors. The fact that disaster was averted does not excuse control failures that created the risk in the first place. Risk management adequacy must be judged ex ante (before the error), not based on ex post success in limiting damage.

Additionally, the incorrect bid had significant impact beyond Finland on several other bidding areas and markets (Swedish SE1 and SE3 areas), demonstrating cross-border systemic significance of proper risk management in interconnected European electricity markets.

Penalty Determination and Rejection of Exemption Arguments

Legal Framework: Section 20c Exemption Grounds

Under Section 16 of the Finnish Supervision Act, the Energy Authority may impose penalty payments on persons who intentionally or negligently violate REMIT's market manipulation prohibition. However, Section 20c establishes three grounds on which the Energy Authority may refrain from imposing penalties:

1. Self-Remediation Plus Non-Serious Violation (requires all elements):

• Adequate self-initiated remedial measures immediately after discovery; and
• Notification to Energy Authority without delay; and
• Violation not serious or repeated;

2. Minor Violation:

• The violation is considered minor;

3. Manifest Unreasonableness:

• Imposing a penalty would otherwise be manifestly unreasonable.

Kinect's Arguments for Penalty Waiver

Kinect requested that no penalty be imposed, arguing it qualified for exemption because:

• It took adequate self-initiated remedial measures immediately (including intraday purchases recovering 98.4% of erroneous volume, UMM publication, corrective system changes);
• It reported the incident to the Energy Authority without delay;
• The infringement was not serious (unintentional, first-time occurrence);
• Imposing a penalty would be clearly unreasonable given Kinect’s unintentional nature, immediate disclosure, financial loss rather than gains (actual amount redacted), lack of consumer harm (consumers benefited from negative prices), and precedent from the Norwegian Vattenfall decision.

Energy Authority's Rejection of All Exemption Grounds

The Energy Authority determined that no circumstances justified refraining from proposing a penalty payment.

Both Section 20c(1) Self-Remediation and Section 20c(2) Non-Serious Violation Not Satisfied

While Kinect took immediate actions and reported promptly, the violation was serious given:

• Potential systemic impact on electricity system. Fingrid prepared to invoke emergency system operator powers;
• Significant cross-border market effects. Price distortions in Swedish bidding areas;
• Fundamental risk management failures. Systematic absence of controls reflecting "general disregard."

The seriousness element precluded this exemption despite satisfaction of the self-remediation and prompt reporting elements.

Section 20c(2) - Minor Violation: Not Satisfied. The violation could not be considered minor given:

• Market impact magnitude. 251.58 EUR/MWh price distortion, ten hours at regulatory minimum, approximately half of total Finnish area trading volume;
• Organisational control deficiencies. Systematic failures across automated controls, manual controls, and IT change management;
• Systemic risk materialisation. Only external factors (Kinect's solvency and market cooperation) prevented electricity system emergency intervention.

Section 20c(3) - Manifest Unreasonableness: Not Satisfied. Considering the nature and significance of the violation, penalty imposition was proportionate and reasonable. The Energy Authority explicitly rejected the notion that Kinect's intra-day market purchases should reduce penalty exposure, noting that under electricity market regulations, Kinect had a specific obligation to take measures to fulfil its balance responsibility appropriately. These purchases were legally mandated actions to discharge balance responsibility under Article 5(1) of Regulation 2019/943 (EU Electricity Regulation) and Section 73 of the Finnish Electricity Market Act, not voluntary remediation efforts deserving credit.

Overall, market participants cannot claim mitigation credit for doing what they are legally obligated to do. The costs Kinect incurred were consequences of its own control failures, not praiseworthy remedial efforts.

Procedural Next Steps: Market Court Proposal

The Energy Authority concluded that Kinect's actions constitute a violation of REMIT's key provision prohibiting market manipulation and that the erroneous bid had significant market impact. Due to the nature and significance of the act, the Energy Authority will propose to the Finnish Market Court (Markkinaoikeus) that a penalty payment be imposed on Kinect, with detailed grounds to be presented in that proceeding.

Critical procedural points:

• The Energy Authority's decision is not yet legally binding. Under Finnish law, the Energy Authority does not impose penalties directly but makes proposals to the Market Court;
• The Market Court conducts independent assessment and makes final determinations on penalty imposition and quantum;
• Kinect may appeal the Energy Authority's decision to the Market Court and will have opportunity to present additional evidence and arguments regarding both liability and sanction proportionality;
• Penalty amount not yet determined. The Energy Authority's decision establishing liability and recommending penalty imposition does not specify quantum (i.e. the size of the fine), which will be determined by the Market Court based on factors including nature and extent of infringement, degree of culpability, duration, and precedent from prior enforcement actions.