Electricity utilities rely extensively on commodity derivative markets to hedge risks in relation to their physical assets and to provide tailored financing solutions to their clients and project developers.
Clearing thresholds should reflect the fundamental role that commodity derivatives play in enabling the energy transition, and in ensuring predictable electricity prices for producers and end-consumers alike.
Eurelectric therefore supports the general direction of ESMA’s public consultation on clearing thresholds and calls on policymakers to avoid burdening utilities with overly restrictive or granular clearing thresholds, which would require a reorganisation of centralised and portfolio-based risk management.
The implementation of key EMIR implementing rules should not be delayed in the context of the European Commission’s simplification agenda. Importantly, the revised clearing threshold calculation must be fast-tracked to prevent renewed stress on cleared markets.
- Preserve the current level of the commodity clearing threshold (EUR 4 billion) and increase it to EUR 7 billion to account for energy commodity inflation and increased market volatility in the context of the energy transition. The level of other clearing thresholds should also be retained to allow for prudent risk management.
- Keep a unified clearing threshold for commodity derivatives: granular thresholds for different sub-asset classes disrupt utilities’ centralised risk management strategies and could lead to unintended consequences such as liquidity splits.
- Account for innovative hedging tools in the definition for risk-reducing OTC derivatives by recognising utilities’ key role in facilitating renewables’ build-out through virtual power purchase agreements (vPPAs).
- Define criteria to periodically assess whether clearing thresholds are adapted to market conditions and adapt thresholds dynamically to ensure that only systemically relevant risk takers are captured by the clearing obligation.