The fine imposed on Energi Danmark A/S (Energi Danmark) is based on a report made by the Danish Energy Regulatory Authority (Danish Utility Regulator, DUR) in March 2024, which was referred to the Danish State Prosecutor for Serious Economic and International Crime.

This penalty comes under the REMIT Regulation (EU) No 1227/2011, which prohibits market manipulation and seeks to protect the integrity and transparency of the EU’s wholesale energy markets.

“This is a breach of the EU’s ban on market manipulation, which is detrimental to competition in cross-border energy markets and thus also to the prices that consumers will ultimately pay for their electricity supplies,” said Carsten Smidt, Director of the Danish Electricity Supply Authority. 

Wash trading

According to energy regulator (DUR) and the Danish state prosecutor, the misconduct, which took place on January 3, 2020, included five cases of electricity market manipulation and one attempt to do so in violation of Article 5 of REMIT. Through its behavior, called “cross-zonal capacity hoarding”, the company acquired all, or a significant share of, the capacity available on an electricity transmission connection between two bidding areas by trading with itself. In this way, Energi Danmark prevented other market participants from using the capacity, thereby creating or increasing a price difference between the two bidding areas.

DUR estimated the financial gain from the conduct at DKr 80,693 ($11,740). The prosecutor fined Energi Danmark DKr 380,000 ($55,300), which Energi Danmark has accepted.

In December 2018, Energi Danmark agreed to pay a fine of DKr 750,000 ($109,000) for violating the same prohibition against market manipulation, which the Danish Energy Authority emphasized as “an aggravating circumstance” in its police report. 

The EU Agency for the Cooperation of Energy Regulators (ACER) said it welcomed this third decision related to the hoarding of cross-border electricity transmission capacity in Denmark. ACER emphasized the importance of vigorous enforcement to enhance public trust in the EU’s electricity markets and protect European consumers from market abuse.

“The conclusion of the case contributes to the further development of a much-needed practice that should hopefully help all energy companies that trade in electricity and gas on the international wholesale market to understand which trades are permitted and which are prohibited within the framework of the EU’s REMIT rules,” said Smidt. 

Serious deterrent?

It is clear that the regulators are taking action to enforce REMIT regulations and that the fines are intended to send a message that market manipulation will not be tolerated. However, the level of this recent fine is questionable. As reported, Energi Danmark has received fines for similar transgressions and although the fine is higher than the estimated financial gain, it could be argued that when fines are on the lower end of scale, some firms could simply factor these into the “costs of doing business.”

Rob Mason, Director, Regulatory Intelligence Strategy & Market Intelligence at Global Relay, said: “It’s interesting to see more fines of this nature, which seem to focus on manipulating available capacity. In this instance the counterparty was found to be trading with itself (wash trading) and by doing so, preventing others from participating with the motivation of squeezing the price.

“Noting the most recent occurrence was from 2020, this is quite complex manipulation which the regulators have identified and prosecuted, though the fines are fairly light, which makes one ask whether this will be regarded as a serious credible deterrent.”