The past few days has seen announcements of market interventions and further discussions on market redesigns, at the EU level, in member states, and also in the UK. In addition, schemes have been announced to assist energy firms with the increased margin calls that are arising due to higher prices and volatility. We provide a high level summary here. More posts for each stream will follow over the coming weeks.
Last week the European Commission announced a package of measures, based on an announcement last week by Ursula von der Leyen (see here ) including:
- Measures aimed at reducing electricity demand by at least 10% until 31 March 2023 – the mechanism is left to each member state.
- A temporary revenue cap on “inframarginal electricity producers” set at 180 EUR/ MWh – this caps the revenue that can be accrued by certain market participants to when the price is above that level, with the revenue used to lower bills at the consumption end.
- A “solidarity contribution” on excess profits generated from activities in oil, gas, coal and refining.
- Moves away from using TTF as a benchmark.
Last week EFET published this memo outlining recommended approaches to any interventions. In Romania, more severe interventions have been announced. EFET has published this letter, sent to the Romanian Government, outlining their strong objections to the measures.
In the UK, the government announced a series of measures on 8th September to cap prices for consumers and business, as well as a possible intervention in the wholesale market (see here). Further details are expected this week after the mourning period for Her Majesty Queen Elizabeth II.
Margin call support
Increased volatility in the markets have led to very high margin calls levied on many market participants, which , in some cases, have led to requests for assistance (for example see here on the FT web site for an assistance scheme announced in Sweden). The beginnings of support arrangements in the EU have also been announced (see here ). In the UK, HM Treasury have also announced a scheme here.
Several industry associations have published this joint paper providing recommendations on how to proceed. According to this article, some trading houses have managed without assistance but this element will remain important.
We can expect more announcements on all of these topics over the coming weeks.