The Central Electricity Regulatory Commission (CERC) has recommended to the power ministry that power exchanges should be exempted from non-transferable specific delivery contracts from the purview of the Forward Contracts Regulation Act, (FCRA) 1952. This would enable these exchanges to enter into long-term electricity contracts, not permissible at present, as they are now allowed to enter up to 11 days of contracts. Currently, Indian Energy Exchange (IEE) and Power Exchange of India operate in the day-ahead and term-ahead markets.
CERC Chairman Pramod Deo told Business Standard “We have already made our recommendation to the power ministry. This will enable development of power market in the country.”
A power ministry official, who did not want to be identified, said the ministry had received CERC’s communication on this, though it was yet to forward its say to the consumer affairs ministry.
Consumer Affairs Secretary Rajiv Agarwal said the ministry had not yet received any communication from the power ministry. The Forward Market Commission (FMC), however, has indicated it was open for exempting power exchanges from non-transferable specific delivery contracts. Jayant Deo, MD & CEO of IEE, said, “Any contract discovered on exchange, for which deliveries and payment is made after 11 days, attract provisions of FCRA 1952 and, hence, require the approval of FMC. We had applied for the same in the past, but due to lack of clarity and other reasons, the approval is getting delayed.
‘Considering trade requirement of a transparent price discovery mechanism and the need for a competitive price for longer-duration contracts, we approached the consumer affairs ministry, CERC and the power ministry to find a solution. Clause 27 of FCRA enables the Union government to exempt certain contracts from the purview of FCRA, 1952.”
MG Raoot, MD & CEO of National Power Exchange (NPE), which is yet to be launched, said the exemption of power exchanges from the contracts would lead to the determination of electricity price transparently, according to the market forces on power exchanges. “At present, the product available on the power exchange platform is only day-ahead and term-ahead market, under which power can be traded up to 11 days in advance. To ensure a level-playing field, the forward market has to be opened to power exchanges, as compared to a bilateral market. Then only the business will improve. Utilities can also have another market available, as now they depend on traders,” he noted.
A state-run power distribution company official observed distribution companies and consumers in particular would get highly competitive prices for longer-duration contracts. “Common consumers stand to benefit in terms of longer supply hours at optimum price.The generators will be able to plan better and optimise their cost. This is a win-win situation for all stakeholders.”