CNMC fines Spanish Electricity Market Particpant EUR 1.1million

[1] Overview of Case Facts

The manipulation in question focused on the submitting of non-genuine bids to alter the order of bid processing, effectively securing priority for NEURO ENERGÍA and its clients.

This scheme exploited using market participant's digital certificates and allowing NEURO ENERGÍA to control the submission and withdrawal of bids in a coordinated manner.

The manipulation strategy was particularly focused on securing high-value export opportunities to France, leveraging market rules to gain an unfair advantage over competitors. The enforcement decision noted that a significant portion of bids submitted by NEURO ENERGÍA were non-genuine, meaning they were not backed by an intent to trade but rather aimed at creating artificial demand to manipulate market outcomes. This practice caused delays and distorted the natural functioning of the market, affecting competition and market efficiency.

CNMC’s investigative timeline was as follows:

• On 16 December 2022, the CNMC received a report from OMIE highlighting unusual, coordinated trading activity in Spain’s continuous intraday electricity market. The report described 13 brokers who manipulated bid queues by submitting bids far removed from market prices. The goal was to manipulate bid processing and gain priority access to the next trading day’s contracts.
• In March 2023, OMIE extended its original investigation, expanding the number of agents involved from 13 to 35, inclusive of NEURO ENERGÍA . The additional agents were found to engage in the same coordinated manipulation of bids during critical time windows, particularly leveraging new rules that went into effect on 4 March 4 2023, which altered bid prioritization based on timing and price competitiveness.
• On 16 March 16 2023, the CNMC’s Director of Energy initiated formal sanctioning proceedings against the 35 entities identified in the reports. The alleged offence, classified as a serious infringement under the Electricity Sector Act, involves coordinated bid manipulation to gain an unfair advantage over other market participants, especially in cross-border trading between Spain and France.

[2] NEURO ENERGÍA’s Defence Claims

NEURO ENERGÍA presented a detailed defence against allegations of market manipulation, asserting that it provided legitimate, automated energy trading services to its clients within the bounds of energy trading regulations. It explained that it was contracted to optimise the bidding process on the wholesale electricity market for various market participants and defended its bidding activities as legitimate as it was adhering to the operational framework provided by the market operator OMIE.

NEURO ENERGÍA’s defences as presented in the case are as follows:

•  Automated Bidding Services. NEURO ENERGÍA used automated systems to manage energy bids for multiple clients, aiming to optimize their positions in the continuous intraday market. The bidding patterns flagged by OMIE resulted from the use of automated tools designed to maximize efficiency in complex energy markets, rather than any deliberate effort to manipulate the market. It contends that its software was designed to operate within the market's legal frameworks and was simply fulfilling its role as a service provider, offering market access and trading optimization services to a wide range of clients without direct involvement in their decision-making.
• Mass sending of bids was legitimate based on ‘First-Come, First-Serve’ basis; OMIE permitted mass bids to be submitted. NEURO ENERGÍA argued that their actions of the mass sending of bids, using digital certificates from 34 other firms, was legitimate because the system at the time operated on a "first-come, first-served" basis and OMIE allowed mass bid submissions. NEURO ENERGÍA claimed that OMIE’s lack of direct interference or disabling of its bidding software validated its practices. NEURO ENERGÍA defended its bidding practices claiming that they adhered to the operational rules of OMIE, particularly in using the first-come, first-serve system.
• No Coordinated Manipulation. NEURO ENERGÍA denies coordinating efforts to manipulate the market, asserting that the similar bidding patterns across different companies were a result of using the same automated software, not concerted action among agents. It contends that while it managed bids for various market participants, it did not inform these participants of any specific trading strategy in the continuous intraday market.
• No coordinated actions among Agents. NEURO ENERGÍA denies the existence of coordinated actions among the agents, asserting that they were unaware of how their digital certificates were being used by NEURO ENERGÍA. It emphasised that each agent acted independently, without communication or awareness of the overall trading strategy that NEURO ENERGÍA was executing on their behalf. NEURO ENERGÍA claimed that its clients provided daily instructions on how much energy to bid or sell, and it was responsible for configuring its systems to follow those instructions.
• Technical Complexities and Errors. NEURO ENERGÍA attributed any irregularities or excessive bids to technical challenges and the nature of automated systems rather than deliberate market manipulation. It explains that automated bidding systems may have inadvertently triggered market anomalies, but there was no fraudulent intent. Specifically, it argued that it did not breach the economic limits set by OMIE, and claimed its actions, if deemed problematic, should only be classified as administrative oversights, rather than deliberate attempts to manipulate the market.
• Compliance with Market Regulations. NEURO ENERGÍA emphasised that it operated in accordance with market rules and regulations, asserting that its operations were transparent and within the legal boundaries. The company claims it followed established market protocols and did not intentionally breach any rules.
• Minimal Financial Benefit. NEURO ENERGÍA stressed that it did not derive substantial financial gain from the actions that are the subject of the proceedings. It operated as a service provider, optimizing bids for clients, without engaging in manipulative practices for profit. It also disputed any claims that it breached economic limits or profited excessively from its market activities arguing that its offers did not exceed the price caps set by regulators.
• Wide Client Base. NEURO ENERGÍA explains that it was hired by many market participants to manage their bids, which explains the similarities in bidding behaviour across multiple entities. It argues that its services were impartial, and any common patterns were due to the uniform application of its software rather than any coordinated effort.
• Responsibility and Contractual Obligations. NEURO ENERGÍA acknowledged its responsibility as a service provider but stressed that it acted solely within the scope of the contracts it had with its clients. The company maintains that it was performing its duties in optimizing client bids without engaging in illegal behaviour.
• Minimizing Responsibility for Non-Genuine Bids. NEURO ENERGÍA acknowledged that non-genuine bids were placed, but it denied that these bids were intended to manipulate the market. It suggests that these bids were more a result of market complexity or operational errors rather than deliberate attempts to skew the market. It argued that the practice of placing non-genuine bids was not uncommon in the energy market and should not be considered a violation of market rules without clearer evidence of intent to deceive.
• No Intentional Wrongdoing. NEURO ENERGÍA asserted that it did not act with fraudulent intent or attempt to manipulate the market. Any issues were due to the inherent complexities of managing multiple clients’ market positions in a fast-paced and technology driven market.
• Calls for Case Dismissal. In its final plea, NEURO ENERGÍA requested the dismissal of the case, arguing that the CNMC’s allegations were based on misinterpretations of standard market practices. It asserts that if any issues did arise, they should be treated as minor infractions rather than major violations of energy market rules.

[3] CNMC’s Rejection of NEURO ENERGÍA’s Defence Claims

The CNMC rejected NEURO ENERGÍA’s defence, pointing out that while the platform's design allowed for mass bid submissions, it did not make the resulting market distortions lawful. Further facts presented by CNMC in its determination of NEURO ENERGÍA’s REMIT violations are as follows:

• Involvement of Multiple Agents. NEURO ENERGÍA coordinated market activities involving 34 other energy trading agents, providing them with consultancy, demand forecasting, and management services. These agents operated under NEURO ENERGÍA’s direction, allowing the manipulation of the market at a large scale.
• False Bids and Withdrawals. A key aspect of the manipulation involved submitting false or non-genuine bids (orders that were not intended to be executed). These bids were strategically placed to dominate the bidding queue. Once a preferred position was secured, NEURO ENERGÍA would withdraw these bids, ensuring that its genuine bids would be prioritised. This practice distorted the competitive bidding environment, allowing NEURO ENERGÍA and its clients to gain an unfair advantage.
• Manipulation of Digital Certificates. NEURO ENERGÍA had control over the digital certificates of the 34 agents, which were used to submit bids on their behalf. By controlling these digital identities, NEURO ENERGÍA was able to coordinate a large-scale manipulation scheme that disrupted the normal flow of bid submissions and processing. This gave NEURO ENERGÍA a significant advantage in controlling the market, especially in time-sensitive trading windows. Several of the agents noted that they did not even grant permission to NEURO ENERGÍA to use their digital certificate in the continuous intraday market.
• Distortion of Market Operations. The manipulation caused delays in the bid processing system, impacting the normal functioning of the market. This not only distorted competition but also created artificial pricing and supply conditions, preventing other legitimate market participants from operating fairly. The actions of NEURO ENERGÍA and its coordinated agents had a direct impact on the integrity and efficiency of the electricity market.
• Focus on Export to France. The manipulation strategy heavily targeted export opportunities to France. NEURO ENERGÍA exploited these cross-border trading opportunities by securing priority positions in the bidding queue, allowing it to capture lucrative export contracts. This specific focus on export trading created significant market distortions in cross-border electricity trade.
• Non-Genuine Purchase Orders. A substantial portion (60.8%) of the bids submitted by NEURO ENERGÍA were classified as non-genuine. These bids were not intended to be executed but were strategically placed to manipulate the bid processing system. This practice misled other market participants and artificially influenced the order in which bids were processed.
• Violation of Market Regulations. NEURO ENERGÍA’s actions violated market rules designed to ensure fair competition and transparency in the trading process. By manipulating the bidding process and coordinating false bids, NEURO ENERGÍA undermined the regulatory framework governing the electricity market, leading to the CNMC’s investigation and sanctions.
• Securing priority position of bids is market manipulation. The intent behind securing a priority position in the market by exploiting system loopholes constitutes manipulation, violating both Spanish and EU regulations aimed at ensuring fair competition and market transparency.
• Regardless of whether OMIE’s system technically permitted NEURO ENERGÍA to submit mass bids, its conduct distorted Electricity Markets.NEURO ENERGÍA’s conduct distorted the electricity market, which is prohibited by law, regardless of whether OMIE’s systems technically allowed the actions to take place.

CNMC provides further detail regarding NEURO ENERGÍA’s manipulation of the intraday electricity market noting its non-genuine submission of bids:

In the period under analysis, comprising a total of 125 trading days, and in the two critical assessment windows, NEURO ENERGÍA Y GESTIÓN, S.L. inserted in the OMIE’s Local Trading Solution (LTS) a total of 160,857 purchase bids at negative prices (between -100 €/MWh and -400 € / M W h and for a volume of 0.1 MWh, which represented 39.2% of the total bids (purchase and sale) submitted by all agents in those trading sessions and critical analysis periods and 90.1% of the total purchase bids inserted by these agents investigated in the critical days and periods analysed. A detailed analysis of these non-genuine bids shows that: 

• • 3.7% (5,916 bids) were not validated by the system: 3.1% because they were inserted for a product that was not open to negotiation and 96.9% because they exceeded the technical parameter of maximum power offered (M-POTMAX- UO), which is a parameter associated with each agent profile, parameterised by the agent itself and, therefore, perfectly controlled by it. 

  • Meanwhile, 96.3% were cancelled (154,941 bids). Of these cancelled bids, 21.2% corresponded to bids that were hidden at that time and that had the condition of not being reactivated after the intraday auction (parameter associated with each agent profile, parameterised by the agent itself and, therefore, perfectly controlled by it), while the remaining 78.2% corresponded to the cancellation of all bids that had been validated by the system (122,021 bids); that is, 100% of the purchase bids at negative prices (between -100 €/MWh and -100 € / M W h ) were cancelled, while the remaining 78.2% corresponded to the cancellation of all bids that had been validated by the system (122,021 bids). 

[4] Sample Defence Statements from Market Agents using Neuro Energia y Gestion’s bidding operation system

• RENEWABLE VENTURES S.L. denies any coordination with other market agents and claims it acted independently and in line with sector regulations. It attributes any involvement to its third-party service provider, NEURO ENERGÍA, which managed its market operations. The company argues it did not profit from the alleged manipulation and was unaware of NEURO ENERGÍA’s methods.
• AUSARTA PRIMA, S.L. denies any knowledge of the alleged manipulative behavior attributed to NEURO ENERGÍA, which handled its bidding operations. The company claims it was unaware of any irregularities and believes OMIE should have informed it earlier about potential misconduct. AUSARTA maintains that its reliance on NEURO ENERGÍA for energy trading was due to the market's complexity.
• REMICA COMERCIALIZADORA (now CIBELES ENERGÍA CENTURY 21 GO) denies any involvement in market manipulation, asserting that it never authorized NEURO ENERGÍA to operate on the continuous intraday market. REMICA emphasizes that any irregularities were due to system errors and that the company did not profit from these actions. It also questions why OMIE did not flag the irregularities sooner.
• ELÉCTRICA SOLLERENSE argues that its limited market activity (they are focused on the Balearic Islands) and minimal involvement in mainland trading make it unlikely they attempted to manipulate the market. The company maintains that it had no coordination with other agents and that its actions were within the bounds of its contract with NEURO ENERGÍA. SOLLERENSE asserts it did not participate in any strategy designed to disrupt market operations.
• FOENER ENERGÍA, S.L. denies any involvement in market manipulation, arguing that it relied on NEURO ENERGÍA to manage its bidding operations. FOENER asserts that it had no control over NEURO ENERGÍA’s methods and was unaware of any coordinated efforts. The company maintains it gained little to no financial benefit from these operations and that any irregularities were caused by human error, not intentional misconduct.
• WATIO WHOLESALE, S.L. denies intentional market manipulation, stating that it contracted NEURO ENERGÍA to handle its energy bids on the wholesale market. WATIO claims that any irregularities resulted from system errors rather than deliberate actions. The company also asserts it was unaware of how NEURO ENERGÍA was handling its bids.
• NEXT ENERGÍA XXI, S.L. denies any wrongdoing, stating that it contracted with NEURO ENERGÍA to handle its trading operations. The company claims it was unaware of any irregularities in NEURO ENERGÍA’s actions and that any common patterns with other agents were coincidental due to the use of the same service provider.
• AGRI ENERGÍA, S.A. defends its actions by pointing out that it relied on NEURO ENERGÍA to manage its market participation. AGRI claims it was unaware of any coordinated efforts to manipulate the market and argues that any issues were due to technical errors, which were promptly addressed.
• ESTRATEGIAS ELÉCTRICAS INTEGRALES, S.A. denies involvement in any market manipulation, emphasizing that it used NEURO ENERGÍA’s services for energy trading. The company argues that it had no knowledge of any coordinated practices and that the contract with NEURO ENERGÍA was based on legitimate market operations.
• ALPEX IBÉRICA DE ENERGÍA, S.L. claims it was unaware of any wrongdoing by NEURO ENERGÍA, its service provider, and emphasizes that it did not benefit from the alleged market manipulation. The company also asserts that it terminated its contract with NEURO ENERGÍA once it became aware of the situation.
• ENERPLUS ENERGÍA, S.A. denies involvement in market manipulation, claiming that it relied on NEURO ENERGÍA for bidding operations. The company argues that it was unaware of any wrongdoing and took immediate action when OMIE issued warnings about irregular activities.
• ELECTRICIDAD ELEIA, S.L.U. defends itself by stating that it had no control over NEURO ENERGÍA’s operations and that it did not intentionally participate in any market manipulation. The company argues that it acted in good faith and relied on NEURO ENERGÍA to manage its market participation.
• FENÍE ENERGÍA, S.A. denies any involvement in market manipulation, emphasizing that it relied on NEURO ENERGÍA’s automated bidding services. The company also claims it was unaware that NEURO ENERGÍA provided similar services to other agents and took steps to switch providers once irregularities were identified.
• ENERGÍA NUFRI, S.L.U. argues that it was not involved in market manipulation, attributing its bidding activities to NEURO ENERGÍA. The company states that any irregularities were due to technical issues rather than intentional manipulation, and it did not profit significantly from the activities in question.