Challenges And Tasks Of The Legal Regulation Of Electric Power And Capacity Trading In The Wholesale Market

The legal regulation of trading in the wholesale electric power and capacity market is based on the Law on the Electric Power Industry and the Wholesale Electric Power and Capacity Market Regulations. The peculiarities of legal regulation established by the Federal Law “On Insolvency (Bankruptcy)” should also be considered. As of March 17, 2020, the List of Wholesale Market Actors Undergoing Bankruptcy Proceedings included 40 companies. Poor payment behavior in the wholesale electric power and capacity market is one of the main issues. Failure to pay does not only affect the settlement status in the market, but also leads directly to an unscrupulous market player being declared insolvent. In this case, the existing legal regulation does not guarantee protection against wholesale electric power and capacity market transactions being disputed unreasonably. It seems that the best way to prevent transactions from being disputed in bad faith is to amend the current revision of Article 61.4 of the Bankruptcy Law by adding provisions stating in which cases transactions required by the wholesale electric power and capacity market rules cannot be disputed.

Keywords

energy law, legal regulation of energy markets, wholesale electric power and capacity market

Received

06.08.2020

Publication date

04.09.2020

Number of characters

20378

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GOST	Nadezhda V. K. Challenges And Tasks Of The Legal Regulation Of Electric Power And Capacity Trading In The Wholesale Market // Energy law forum – 2020. – Issue 3 C. 97-102 [Electronic resource]. URL: https://mlcjournal.ru/S231243500022523-3-1 (circulation date: 29.04.2024). DOI: 10.18572/2410-4396-2020-3-97-102
MLA	Nadezhda V., Koropets "Challenges And Tasks Of The Legal Regulation Of Electric Power And Capacity Trading In The Wholesale Market." Energy law forum 3 (2020):97-102. DOI: 10.18572/2410-4396-2020-3-97-102
APA	Nadezhda V. K. (2020). Challenges And Tasks Of The Legal Regulation Of Electric Power And Capacity Trading In The Wholesale Market. Energy law forum (3), pp.97-102 DOI: 10.18572/2410-4396-2020-3-97-102


1	Legal studies have been conducted on various aspects of the legal regulation of energy markets [1]. As correctly stated by V.V. Romanova, “the regulations governing public relations in energy markets are predominantly established by energy sector-specific laws” [2]. The organization of trading in the wholesale market involving the consummation and settlement of transactions for trading electric power, capacity, and other tradable commodities in the wholesale market is performed by the wholesale market infrastructure organization, the wholesale market commercial operator (ATS, JSC) under the Law on the Electric Power Industry and the Wholesale Market Regulations without a special permit (license) (Article 33 Clause 7 of the Law on the Electric Power Industry). In the study on the legal regulation of energy markets, V.V. Romanova noted that “a material aspect of the legal regulation of the wholesale electric power and capacity market is the establishment of the peculiarities of the legal status and powers of commercial infrastructure organizations, such as the Market Council, the commercial operator, other commercial infrastructure organizations, by the legislator” [3].
2	The volume, prices and cost of electric power purchased daily by wholesale market participants, including the Debtor, are determined by the trading authorities, ATS, JSC and System Operator of the Unified Energy System, JSC, upon the completion of the bidding procedures based on the public bids submitted by wholesale market traders.
3	Exchange trading takes place on both dedicated energy exchanges and global exchanges. In the UK, wholesale electric power trading is mainly conducted via bilateral contracts often linked to the wholesale market price, as well as via the power exchanges operating in the UK, EPEX and Nordpool. In the EU, there are 9 main electric power exchanges: Nord Pool, EEX, IPEX, Powernext, APX NL, APX UK, Belpex, Endex, GME, and Omel. Wholesale electric power trading in France is performed via power exchanges (EPEX Spot SE and Nord Pool (spot markets), EEX (electric power futures contracts trading)) and under bilateral contracts [4].
4	In Russia’s energy market, the current laws stipulate that electric power can be traded both under contracts made in the wholesale electric power and capacity market (WEPCM) and on exchanges, however, while the regulatory framework exists, exchange trading currently fails to attract market players as an efficient electric power trading mechanism. Thus, contracts made in the WEPCM remain the only mechanism for electric power and capacity trading.
5	The peculiarities of legal regulation established by the Federal Law “On Insolvency (Bankruptcy)” should also be considered. The constantly updated List of Wholesale Market Actors (including those disqualified as wholesale market subjects) Undergoing Bankruptcy Proceedings included 40 companies as of March 17, 2020 [5]. Poor payment behavior in the wholesale electric power and capacity market is one of the main issues. Failure to pay does not only affect the settlement status in the market, but also leads directly to an unscrupulous market player being declared insolvent. As per the Bankruptcy Law, the purpose of bankruptcy proceedings is proportional satisfaction of creditors’ claims. It is the duty of the receiver exercising the powers of the debtor’s manager and other management bodies to the extent, in the manner, and on the terms established by this law to achieve this purpose [6].
6	The main task of the trustee in bankruptcy is to maximize the debtor’s bankruptcy assets. Disputing transactions is one of the effective mechanisms. The debtor’s transactions disputable under the Bankruptcy Law are divided into suspicious transactions and transactions with preference (preferential transactions). Any transactions consummated within one month before filing for bankruptcy, including those in the WEPCM, meet the criteria of transactions made during the suspect period. This allows the trustee in bankruptcy to seek the voidance of such transactions for the purpose of restitution in court. This law does not contain any limitations for disputing transactions made in the WEPCM. Thus, the trustee is provided with a mechanism that requires the creditors operating in the market to justify why such transactions cannot be disputed on general grounds.
7	In these circumstances, preventing transactions consummated with the bankrupt in the WEPCM from being unreasonably disputed is of particular importance. Current laws do not contain provisions protecting WEPCM transactions from being disputed unreasonably. Article 61.4 of the Federal Law on Bankruptcy establishes the peculiarities of disputing certain transactions of the debtor. Under Articles 61.2 and 61.3 of the law, transactions consummated on the exchange based on at least one public bid (including financial contracts), as well as actions aimed at performance of obligations and duties arising from such transactions, transactions involving transfer of property and incurrence of obligations or duties consummated in the ordinary course of business of the debtor cannot be disputed, while the debtor’s transactions aimed at performance of obligations for which the debtor has received equivalent reciprocal performance of obligations immediately upon execution of a contract can only be disputed under Article 61.2 Clause 2 of the Bankruptcy Law. The other grounds listed in said article cannot be deemed universally applicable as they apply only to financial contracts.

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4. NP Market Council Association. URL: https://www.np-sr.ru/ru/market/cominfo/foreign/index.htm.

5. https://cfrenergo.ru/monitoring_and_analytics/solvency/

6. Digest of Case Law of the Supreme Court of the Russian Federation No. 3 (2016). URL: https://www.vsrf.ru/ Show_pdf.php?Id=11066.

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