The Lithuanian national energy regulator VERT recently announced a REMIT enforcement action against the Lithuanian transmission system operator Litgrid. This action once again shows that regulators in smaller jurisdictions maintain the same, and often greater, oversight standards as those in larger European power markets.
The breach occurred in September 2022 when Litgrid submitted an erroneous intraday sell order for 410MWh on the Nord Pool exchange. VERT detected that the volume of electricity traded differed significantly from the transmission system operator’s usual hourly amounts.
This erroneous transaction caused an immediate electricity shortage in the Lithuanian power system and disrupted the wider Baltic balancing market. The resulting activation of balancing energy increased market imbalance prices and sent misleading signals regarding supply and demand to the market. VERT concluded these actions created an artificial price level and had violated Article 5 of REMIT.
Mitigation and Remediation
Litgrid avoided a higher penalty by promptly notifying the market of the error via an Urgent Market Message (UMM). The regulator noted the violation was brief and that the transmission system operator cooperated fully throughout the investigation.
VERT also acknowledged that Litgrid had implemented specific remediation measures to prevent a recurrence of erroneous activity. The firm paid a €21,500 fine to resolve the matter and close the enforcement case.
RegTrail Observations
- Calibrate volume alerts. Compliance teams should configure automated trade surveillance alerts to flag intraday orders that exceed historical thresholds.
- Publish UMMs for erroneous trades and orders. This case again illustrates the need to publish UMMs when significant trade errors occur, as is now becoming standard practice (and an expectation) in many markets.
- Accelerate UMM protocols. Market participants must establish protocols between trading desks and reporting teams to ensure UMMs are published within minutes of a detected error.
- Document cooperation. Firms must record all remediation measures and self-reporting actions to provide evidence of cooperation during regulatory inquiries.
- Update market abuse risk assessments (MARAs). Management should integrate this precedent into their MARA’s to reflect that geographic market size doesn't necessarily limit a regulator's ability to enforce REMIT.
