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FAQs on transaction reporting – Question II.3.1.28

Can the Agency provide additional guidance on the difference between bilateral contracts executed outside an organised market place and EXCUTION under the framework of non-standard contracts?


Answer:

In the Agency’s view, in order to distinguish bilateral contracts executed outside an organised market place and EXCUTION under the framework of non-standard contracts the framework under which these contract are executed may play a key role.

The Agency’s stakeholders have provided the following input:

A typical structure of the bilateral contracts for the supply for electricity and/or gas may include (EFET master agreement for electricity:

  1. General Agreement („main body“): Who can use it as a Party? : traders, generators, suppliers, grid operators, customers, having access to the grid

Products: standard physical power/gas products (base/peak, intraday, spot, gas day, forward), non-standard physical products or physical options as well

  1. Election Sheet: contains the results of the negotiation between the Parties about the processes described in the General Agreement:

Clauses marked („…unless otherwise specified in the Election Sheet…“) in the main body have to be customised. Any other clause may be customised.

  1. Annexes (part of the General Agreement by default): Definitions, Confirmation templates

Appendices (optional, selection): Credit Support Annex (bilateral Margining), Allowances Appendix (Emissions Allowances)

  1. Individual transactions defining precisely the energy related contract.

However, other master agreements may not include some of the parts indicated above but are general contracts for the supply for electricity and/or gas that have two main parts: a commercial part and an economic part.

 

Scenario (1)

If market participants have agreed commercial terms under a General Agreement, then market participants may:

  1. Negotiate the economic terms and conclude a contract (commercial + economic terms) a REMIT bilateral contract reportable with Table 1; or
  2. Negotiate the economic terms and conclude a contract (commercial + economic terms) with flexibility, a REMIT non-standard contract reportable with Table 2

 

Scenario (2)

Alternatively, depending on the agreement they may have, market participant may have already agreed commercial and economic terms in one agreement (contract) which include non-standard contract clauses such as take or pay and/or reselling of already purchased quantities and/or different pre-defined pricing formulas.

Under such a contract, a REMIT non-standard contract reportable with Table 2, quantities are not necessarily pre-defined (but they may be) and at least one of the parties is obliged to deliver/offtake agreed quantity or has the single right to request this from the other party.

Under this type of agreement there may be different nomination, pricing flexibility, option exercise and possibility to enter into forward contracts or additional volumes.

Under such a framework agreement, market participants may:

  1. Negotiate the economic terms and conclude a new contract: a REMIT bilateral contract reportable with Table 1; or
  2. Use the flexibility and fixing events which can be reported as EXECUTION with Table 1.

 

Below a few examples related to scenario (1) and (2):

 

Last update: 14/12/2016   RSS_Icon Subscribe to this Page’s RSS