The Exchange Council of the European Energy Exchange (EEX) held its third meeting of the year, chaired by Dr. Bernhard Walter, Head of Market Design and Regulatory Affairs at EnBW AG, on 21 September 2022. The predominant topics of the discussions were the current market situation and the ongoing political proposals at EU level, about measures to be taken to support the market and to help consumers and the industry to cope with high energy prices.
The Exchange Council members are fully aware of the current stressed market conditions that are also triggered by the external energy shock and the challenges for both the economy and the consumers due to the high prices for power and gas. The Council understands the situation that has led to the debate about the need for reasonable intervention to help vulnerable customers to cope with unprecedented price levels. At the same time, the members believe that any political intervention must be designed in a way that keeps the current pricing mechanisms intact and does not remove incentives to reduce demand and bring new supply to the market in order to cope with the fundamental scarcity situation. It generally supports the Commission in its objective for a Europewide aligned solution to reduce the impact of high prices for consumers and industry.
With regards to the proposed revenue cap for inframarginal technologies in the European electricity market the Exchange Council also encourages the Commission not to intervene on the functioning of the energy wholesale markets. The members recommended strongly that the revenue cap calculation – if decided by the Counsel – must consider all trading activities on exchange and OTC, and not only the spot market activity but also the long-term hedges being an essential part of a professional risk management. Furthermore, any cap should be applied only after the settlement has taken place. At the same time the Exchange Council members encouraged the Commission to evaluate whether other measures, such as taxation, may have a similar effect for the consumers but less impact on the functioning of the market than the proposed inframarginal revenue cap.
As another key topic, the Exchange Council discussed financial liquidity issues and the concerns about the increased margining requirements caused by the high prices. The Exchange Council Members agreed that to prevent market participants from facing financial liquidity issues all supportive measures, including state guarantees and the acceptance of EUA as collateral need quick evaluation and implementation.
Based on the reports of the Exchange Management Board and Market Surveillance Office, the Exchange Council re-assured itself that the exchange and its price determination mechanisms worked well also under the current circumstances. And it stated clearly that a robust and transparent price formation process, combined with sound policies to ensure an orderly market functioning is essential under any market circumstances but especially when markets are highly volatile. In addition, the fact that already implemented “automated circuit breakers” were triggered several times in the recent past, was noted by the Exchange Council. The Exchange Council Members pointed out that any proposal to change the longer-term market design shall not intervene in the functioning of the market, ensure market stability and maintain a level-playing field and must not deteriorate confidence in the proper functioning of the markets.
The Exchange Council of EEX is an official body of the exchange under the German Exchange Act. This committee consists of up to 24 members who are elected from among the trading participants in four voting groups in order to represent the various interests and businesses appropriately. The tasks of the Exchange Council include the decision on the rules and regulations of the exchange and their amendments. The Exchange Council is also responsible for the supervision of the Management Board of the Exchange and the appointment of the Head of the Market Surveillance.