Market Surveillance

The Need for Market Surveillance

  • In a vertically integrated electricity supply structure the Regulator is responsible for monitoring and regulation 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.

Purpose of Market Surveillance

Market surveillance is key in a competitive electricity market as this ensures good market behavior and operation through realization of the following key components:

  • Good market practice that is based on
    • Fairness
    • Accuracy/Correctness
    • Equal treatment of all players
    • Adherence to market rules
    • Enforcement of penalties for defaulters
    • Transparency
    • Confidentiality
  • Data collection and analysis
  • Strategies to minimize/prevent market abuse
  • Good Reporting structures (information flow, analysis, transfer and sharing)

 

The Market Surveillance function is, in principle, the official established market regulatory body that has access to the database of the Market Operator. Market surveillance activities result in reports covering at least the following three main issues:

  • evaluation of the market pricing,
  • evaluation of the individual participants’ behavior and
  • Report on the status/trend in the development of fundamental figures with a potential influence on pricing.

Market surveillance (MS) Responsibilities in SAPP

The main tasks of the SAPP Markets Monitoring & Surveillance Team are to:

  1. Conduct investigations of possible breaches on laws and regulations governing the SAPP market operations
  2. Ensure that all participants within the market benefit from the same level of protection, regardless of type of participant, country and size
  3. Continuously monitor the SAPP trades and price development, and ensure that the members adhere to the rules as set in the SAPP Market Book of Rules and the Participation Agreement
  4. Keep track, check and report anomalies on bidding behavior by participants in the SAPP trading market based on available information.
  5. Collect information and monitor that the participants keep the Markets trading rules for submission of information e.g. bilateral schedules, transmission capacities etc.
  6. Monitor and ensure that participants do not get and misuse inside information that is not publicly available or publicly known in the market but can influence the prices in the market.
  7. Monitor that participants do not disclose information to persons not concerned before submission of such information to the market.
  8. Monitor that participants do not on purpose contribute to move prices beyond real market value.
  9. Ensure good market behavior by monitoring and controlling of the key market components highlighted in Section 2 of these Terms of Reference.
  10. Issue regular reports on market performance to SAPP MANCO, RERA and the MSC.
  11. Any other task as assigned by the SAPP from time to time.