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Enhancing Information Transparency in Power and Gas Markets for Increased Competition

This position paper by Paul Dawson from Barclays Capital emphasizes the need for greater information transparency in the power and gas sectors. It identifies the lack of information transparency as a significant barrier to competition and liquidity. Key points include the necessity for traders to understand supply, demand, and transport fundamentals to accurately predict price movements, and the importance of addressing asymmetric information to enhance market confidence. The paper supports initiatives by the Commission and ERGEG aimed at improving data availability, stressing that transparency fosters competition and mitigates risks associated with collusion.

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Enhancing Information Transparency in Power and Gas Markets for Increased Competition

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  1. EFET Position on Information Transparency Paul Dawson, Barclays Capital ERGEG Public Hearing on Transparency 6th July 2006

  2. Lack of information transparency is a key barrier to greater competition and liquidity • Traders need to understand supply, demand and transport fundamentals to take a view on future price movements • Customer and market confidence requires ability to explain price movements in terms of fundamentals • Ability to understand and quantify associated risks is essential to liquidity provision and greater competition • Asymmetric information increases risk and reduces liquidity • The lack of information transparency is a key barrier to greater competition in the power and gas sectors • Commission and ERGEG initiatives to address this problem are hugely welcome

  3. Physical generation data released Unit-by-unit Complete aggregated Incomplete Nothing

  4. Generation data releasedand “available” Unit-by-unit Complete aggregated Incomplete Nothing

  5. Actual demand data release Real-time Partial Nothing

  6. Perceived risk of collusion should not limit information made available • Collusion is also a concern in opaque markets • Aggregation can address concerns for ex ante information • No grounds for restricting ex post production data & standing capacity data • Transparency allows traders to provide liquidity and competition even in presence of collusion • Transparency = effective scrutiny from participants, regulators, academics etc = effective regulation • Anti-trust and market abuse rules also apply • Delaying information release pending the development of sufficient competition & liquidity is inherently circular • Benefits of transparency >> potential detriment

  7. Commercial confidentiality should not unduly limit information made available • Confidentiality of ex ante information is arguable, but limited aggregation addresses concerns • Standing data and ex post production data should not present major concerns (borne out by UK, Spain and Nordpool experience) • Trading is a zero-sum game • Case for temporary differentiation for small independent generators in isolated and illiquid national markets • Even delayed plant-by-plant information is hugely valuable • Commercial data provision = data is no longer confidential (but coverage is partial and costly)

  8. Information requirements: generation and demand • Ex post, actual generation data • Plant-by-plant • As soon as practicable after generation • Prompt publication of unplanned outages • Ex ante generation data • Installed capacity by plant • Annual maintenance and availability with quarterly updates • Planned availability for the coming week • Aggregated by fuel per price zone or smaller areas if feasible • Timetable for transition to plant-by-plant disclosure • Demand • Hub-by-hub forecasts per TSO forecasts and at least at D-1 • Close to real-time actual • Historical data for past 3 years

  9. Information requirements: transmission capacity etc • Forecast capacity, maintenance etc from year-ahead to day-ahead • Actual outage details • Capacity requests, offers and bookings (including any long-term contracts and bookings) • Thermal, ratings and flows • Immediate publication of assumptions and estimation methodologies is also required (in particular treatment of contingency safety margins)

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