The European Federation of Energy Traders (EFET) General Agreement is a contract for energy trading between companies operating within the European Union. It was initially created in 1999 to establish a standard framework for electricity and gas trades in Europe and has since been updated to include new types of trades and products.
The EFET General Agreement serves as a template for a range of energy trading transactions. It covers trades for physical delivery of energy, financial settlement, and combinations of the two. The General Agreement is also flexible, allowing parties to adapt it to specific transaction needs while maintaining the essential provisions.
The EFET General Agreement is based on the principle of netting, which allows parties to aggregate multiple trades into a single transaction. This simplifies the settlement process and reduces the number of transactions needed, resulting in lower transaction costs. It also enables parties to manage their risk more effectively by hedging their positions across different trades.
The EFET General Agreement includes provisions covering the delivery and acceptance of physical energy, payment terms, force majeure, and dispute resolution. It also includes provisions for a range of financial products such as forwards, swaps, and options.
One advantage of using the EFET General Agreement is that it is widely recognized and accepted in the European energy trading market. As a result, it can help to streamline the negotiation process and reduce the time and costs associated with drafting and negotiating individual contracts. Additionally, by using a standardized contract, both parties are on the same page and can rely on the same terms, which can help to minimize misunderstandings.
In conclusion, the EFET General Agreement is an important tool for companies trading energy within the European Union. It provides a standard template for energy trading, enabling parties to agree on terms and conditions that are acceptable to both parties. By reducing transaction costs and streamlining negotiations, it helps to facilitate energy trading across Europe.