The Need for Market Surveillance
- In a vertically integrated electricity supply structure the Regulator responsible for electricity prices monitors and regulates the electricity companies’ income by controlling costs and profits.
- In the last two decades electricity supply restructuring and reorganization has led to new challenges within regulation:
- INCOME to an electricity company is not anymore based on a regulated price, but on a market-determined price.
- COSTS are not anymore only dependent on own performance, but also on market prices.
- PROFITS are still dependent on the difference between income and cost, but are now influenced by the different market prices. Thus the possibility for increased profit through MANIPULATION of individual market prices has emerged.
- The restructuring and reorganization has also resulted in the need to monitor the market price and its plausibility respective correctness in general.
Market surveillance is one of the new instruments needed in order to be able to cope with these new challenges:
- Market surveillance is first and foremost a function responsible for collecting data from the market;
- Market surveillance has next to perform an analysis of the collected data with the objective of verifying that the pricing in the market has been correct, and
- That individual behavior corresponds to what can be expected in the respective market environment and period of activity
Market surveillance (MS) Responsibilities
- MS has access to DAM-data and will thus be the place where incorrect behavior can be determined.
- Depending on MS’s access to data from outside SAPP’s DAM MS can evaluate the correctness of the market price.
- If MS detects an incorrect price they can investigate whether the behavior leading to an incorrect price was deliberately or accidentally.
- If MS at SAPP has limited or even no access to data from outside of SAPP’s operational data they in the worst case will not be able to detect anything.
- MS will be able to recommend SAPP-internal consequences, e.g. the expression of warnings, issuing of penalties or even disclosure of participants from trading.
- MS will be able to communicate their internal results to market supervision (the authorities).