The Central Electricity Regulatory Commission (CERC) has directed power exchanges to cut bidding block time from an hour at present to 15 minutes, while deciding to keep in abeyance the proposal of evening trading in power exchanges.
Officials said exchanges have been given time till the end of this month to work out the procedural details on bidding time. “It will take the market towards real time availability of physical delivery of power and thus remove uncertainty of power availability for those buying power. It would also help in better price discovery for value of electricity, being closer to the time of use,” said one.
Besides, the price gap between power purchase on exchanges and bilateral or off-market deals will be bridged, since OTC market bidding follows a 15-minute time block. They said this would give a definite push to renewable resource-based power as well, since the time between making the commitment and actual delivery of wind power or solar power can be bridged.
An hour’s time is too wide, since both are natural resources, based on wind velocity and intensity of sunlight, not in the control of human beings, they explained.
In the case of evening trading, CERC feels the day-ahead market (or simply the morning market) is yet to pick up volumes and liquidity is still low. “Introduction of evening market will split the liquidity of the market further and adversely affect price discovery in the morning session. Besides, CERC has also asked power exchanges to prepare a report on the low liquidity in the intra-day day and contingency market already prevalent in the morning session of the power exchanges,” said an official.
Exchanges have also been urged to form separate clearing houses for transactions. “While it is desirable to have the clearing house separate from the trading exchange, there is no time limit for the exchanges to act upon it. Though it has been aptly provided in the power regulation guidelines of the commission, there is no deadline. We do not have a proposal right now. The proposal should come from the exchanges, since these have evolved over time and volumes have also gone up,” according to an official.
To improve the design of the exchanges, CERC had also suggested circuit breakers or filters in trades to curb volatility. Lately, however, it has been seen that a few states prefer not to buy power and, instead, resort to load shedding, which results in an artificially subdued demand for electricity.