This week MEKH, the Hungarian energy regulator, published a cautionary notice regarding REMIT compliance amidst ongoing extreme weather and other technical market factors (click here).
Several sources have reported the shut-down of Hungary’s sole nuclear generation facility, the 2000 MW Paks power plant, due to the low water levels on the Danube. This, combined with the abnormally high temperatures expected in the country over the coming period, MEKH has taken the relatively rare step of reminding market participants of their REMIT obligations amid security of supply concerns.
Its main areas of focus include the availability and utilization of domestic generation capacity, power plant outages and capacity changes, wholesale bidding behaviour, and the availability and utilization of cross-border capacity. MEKH cites the importance of “market processes” being properly followed, particularly with regard to the disclosure of inside information. While the prohibition of market manipulation and transaction reporting are also mentioned, the main emphasis is understandably on inside information disclosure;
Regarding inside information, MEKH reminds market participants that published information must describe “the nature, expected duration, and market significance of the outage or capacity change in sufficient detail” and that market participants must ensure that any changes or clarifications of the information are published without delay, including when capacity returns to service. At the same time, the Regulator also notes that high wholesale prices, and separately the outage of a generation unit for technical or economic reasons, are not in themselves unlawful or indicative of market manipulation, provided that price signals reflect "genuine supply or capacity constraints" as part of the market's proper functioning;
MEKH stresses at the same time however that it will act against any conduct which may create artificial shortages, send misleading market signals, or breach the prohibitions on insider trading and market manipulation, and that it intends to assess technical, economic and commercial circumstances in a "fact-based, proportionate, and professionally sound manner". MEKH also notes that during this period of “enhanced monitoring” it will work with MAVIR, the Hungarian TSO, and ACER to ensure that information relevant to market functioning is available in a timely, accurate, and sufficiently detailed manner. No specific mention of the Paks outage is made in the announcement.
Finally, MEKH reminds market participants that it continues to provide assistance to market participants regarding their REMIT obligations and warns explicitly that it may initiate targeted inspections in certain cases.
While it is not unprecedented for a Regulator to issue such a message to the market under tight market conditions, the elevated sensitivity to questionable behaviour given the major loss of baseload capacity in the Hungarian bidding zone, combined with the ongoing media coverage of high temperatures across the region likely elevates regulatory and reputational risk for firms active in the Hungarian market and adjacent bidding zones.
