Wholesale energy market registration. New rules for wholesale natural gas and electricity trading effective from October 15, 2023!

Registration as a wholesale energy market participant.

New rules for wholesale trading of natural gas and electricity effective October 15, 2023! 

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On October 4, 2023, the National Energy and Utilities Regulatory Commission (the Regulator) issued a significant decision affecting participants in the electricity and natural gas markets.

The Regulator adopted Resolution No. 1812 on October 4, 2023, which establishes the Procedure for the Registration of Wholesale Energy Market Participants, effective from October 15, 2023.

The new rules for wholesale electricity and natural gas trading were introduced following the publication of the REMIT Act.

On June 10, 2023, the Verkhovna Rada of Ukraine passed the Law of Ukraine "On Amendments to Certain Laws of Ukraine Regarding the Prevention of Abuse in Wholesale Energy Markets," commonly referred to as the "REMIT Act."

This act introduced significant changes to Ukrainian legislation governing the natural gas and electricity markets.

In short, the REMIT Act is designed to align Ukrainian law with EU Regulation No. 1227/2011 (the REMIT Regulation), which is a prerequisite for Ukraine's EU accession.

 The REMIT Regulation is a set of European rules aimed at preventing abuse in wholesale energy markets and establishing liability for market manipulation by participants.

Implementing these standards is essential for creating a competitive and transparent energy market, ensuring fair energy prices for both residential and non-residential consumers.

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Here is what entities intending to engage in wholesale energy trading need to know.

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Following the adoption of the REMIT Act, only entities registered as wholesale energy market participants in accordance with the Regulator's procedure are permitted to conduct wholesale energy transactions in the natural gas and electricity markets.

Please note that this rule applies to wholesale energy product transactions with a place of delivery in Ukraine, as well as those from Ukraine to other countries.

Registration of wholesale energy market participants is handled by the NEURC based on a registration form submitted by the business entity, as approved by the Regulator.

The registration form must be completed in both Ukrainian and English and submitted to the NEURC. Ukrainian residents must submit it electronically, while non-residents must submit it in both electronic and paper formats.

The NEURC then verifies the completeness and accuracy of the registration form and ensures it aligns with information available in Ukraine's state electronic registers.

If there are no grounds for refusing to register a business entity as a wholesale energy market participant, the NEURC will register it in the Register of Wholesale Energy Market Participants within 10 business days of receiving the registration form by assigning an ECRB code to the entity.

Please note that the NEURC may refuse to register a business entity in the Register of Wholesale Energy Market Participants on the following grounds:

- the registration form is submitted by a person whose authority is unconfirmed or absent;

- the information provided in the registration form does not match data from Ukraine's state electronic registers;

- the registration form is incomplete and/or incorrectly filled out;

- there is information that the business entity is controlled, within the meaning of Article 1 of the Law of Ukraine "On Protection of Economic Competition," by residents of states engaged in armed aggression against Ukraine, as defined in Article 1 of the Law of Ukraine "On Defense of Ukraine."

However, once the grounds for refusal have been addressed, the business entity may resubmit the registration form to the NEURC.

The procedure also establishes a recommended schedule for business entities that hold licenses issued by the NEURC for energy-related activities and engage in transactions involving wholesale energy products in Ukraine to submit their registration forms for the Register of Wholesale Energy Market Participants.

For example, the recommended period for traders is from 10.11.2023 to 15.11.2023, for electricity suppliers to consumers from 29.11.2023 to 14.12.2023, and for natural gas suppliers from 15.12.2023 to 29.12.2023.

To summarize the above, the following points should be noted:

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Natural gas and electricity market participants engaged in the purchase and sale of energy resources must register as wholesale energy market participants.

This applies both to trading operations within Ukraine and to the supply of energy resources outside its borders.

It should also be noted that the Law requires registration as a wholesale energy market participant for more than just those entities directly buying and selling energy resources.

In accordance with the REMIT Law, every business entity engaged in trading wholesale energy products must register as a wholesale energy market participant. These products include contracts (agreements) regardless of where or when they were concluded, in particular:

 - contracts for the purchase and sale of electricity or natural gas;

 - derivative contracts whose underlying asset is electricity or natural gas;

 - contracts for the transmission of electricity or transportation of natural gas, and access to capacity/distribution capacity;

- derivative contracts for the transfer of electricity or natural gas, or for access to transmission/distribution capacity;

- contracts for the supply or distribution of electricity and/or natural gas to end consumers with a total nominal consumption capacity of the consumer's installations that provides the technical capability to consume 600 GWh of electricity or gas per year or more.

The registration process is straightforward and involves only submitting a completed form to the NEURC with the relevant information about the business entity.

However, it should be noted that there are specific grounds for refusing to register a business entity as a wholesale energy market participant, as well as grounds for excluding a participant from the market.

Ultimately, these legislative changes create the proper conditions for the development and improvement of the natural gas and electricity markets, while also bringing Ukraine closer to completing the EU accession process.

The legal consulting firm FEDOTOV & PARTNERS provides services for the registration of wholesale energy market participants; our team specializes in providing services to participants in the electricity and natural gas markets.

Our experience in supporting energy companies allows us to say that we not only know what is written in energy laws, but we also understand how the energy business works in practice. If you have any legal questions, we are always ready to help and offer you the most optimal solutions to your problems.

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