The Central Electricity Regulatory Commission (CERC) has directed Indian Energy Exchange (IEX) and Power Exchange India Ltd (PXIL) to amend their business rules and by-laws to clarify their members’ roles.
In July this year, Tata Power Trading, the electricity trading arm of largest private power generator Tata Power went to CERC accusing the exchanges of allowing some of their members to function like power traders, allegedly without any licence.
In an order passed yesterday, CERC asked the exchanges to amend their rules and by-laws to incorporate the role of members as defined by it, to avoid “ambiguity”. The members without trading licence could only provide information technology (IT) infrastructure, advisory services and act as “facilitators” for delivery of power. They would not be able to take up any financial obligation on their clients’ behalf.
A client needs to go through a member to buy or sell power at IEX and PXIL. Power generators, distribution companies, independent power producers (IPPs), captive power producers (CPPs), merchant power plants and traders — with minimum net worth of Rs 1.5 crore — are eligible to become IEX members.
Tata Power Trading had argued that members other than trading licensees, referred to as “brokers” by the company in its petition, were neither grid connected entities nor trading licensees and were “carrying out trading in the exchanges in contravention of the provisions of the Electricity Act”. The Electricity Act 2003 defines power trading under sub-section 71 of Section 2 as “purchase of electricity for resale thereof”. The Act further defines an electricity trader under sub-section 26 as “a person who has been granted a license to undertake trading in electricity”.
Thus, Tata Power Trading said, while they (the exchanges) had to follow the stringent norms as required from a licensed trader, like the net worth criteria, annual trading licence fee and the submission of information regarding its operations to the commission, these were not applied to the “brokers”.
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IEX argued that its members were not covered under the definition of power trading, as defined by the Electricity Act, as they did not buy or sell power in their own name. “They only facilitate the contracts, which are entered into at the exchange,” a senior official from IEX said.
“Only 10 out of over 60 registered members at IEX are not licensed traders. Also, only two of these 10 unlicensed members are active. But going forward, this can discourage those people to become members who are not licensed,” he added. The 10 IEX members include names like MF Global Commodities India, Manikaran Power Ltd and Alankit Imagination Ltd.
CERC is working on a proposal to formulate norms for functioning of power exchanges in India. The regulations, a draft of which is currently being discussed, are likely to be announced by the commission soon.