CERC gives nod to country's first power exchange

The country's first power exchange, which will aid a transparent power market, is beginning to take shape. The Indian Energy Exchange Ltd (IEEL), a joint venture company formed by Financial Technologies (India) Ltd (FTIL) and MCX (Multi Commodity Exchange), has got the Central Electricity Regulatory Commission (CERC) nod to set up the first nation-wide power exchange (PX).

A PX, just like stock and commodity bourses, acts as a platform for buying, selling and trading in electricity. Currently, there is no such exchange in India and electricity is traded bilaterally at mutually agreed rates.

NTPC Vidyut Vyapar Nigam Ltd (NVVN), a subsidiary of NTPC, along with the National Commodity & Derivatives Exchange Limited (NCDEX) have also filed a proposal to set up another PX in the country.

"We might see two PXs getting operational before the year ends," said a senior official of the CERC.

A PX for electricity trading is expected to streamline power trading along with standardising electricity as a tradable product. It would also provide a payment security mechanism to buyers and sellers.

"The commission wants the upcoming PXs to emerge as a market guided institution with minimal regulation," the official added. Industry officials are not yet willing to say whether this would reduce or increase the cost of traded power but stress that the price discovery would become very efficient.

"We are now finalising the modalities for the PX," said the MCX official. On being asked if the exchange would become operational by December, he said, "We are not sure if implementation would be over by then." The participation in the exchange would be voluntary.

FTIL and MCX jointly have 51 per cent stake in the proposed exchange with rest of the share taken by the power sector companies, financial institutions along with power trading companies, informed a senior official of MCX. The country's largest power trading company, PTC India has also become part of this venture.

The PX would have contract systems for the day-ahead power. Also, the exchange would allow "portfolio or block contracts" by which a power trader would be able to source power from multiple generators and sell it on PX through a collective number.

As per the current CERC norms, such bunching of power from multiple sources is not allowed. The commission only allows point-to-point sale.

Though India is a country facing acute power deficit, there are instances of hourly surplus at any given time of the day round the year, which is available for trading, according to a Delhi-based power consultant.

PX would bring transparency with multiple buyers and sellers converging on one platform, replacing the current trader-dominated system, said the consultant.

But would it benefit the power traders as well? Well, it would, said the consultant because today the traders' margins are capped by 4 paise, but at the PX their margins won't get capped. However, there is a proposal of charging one paisa per unit as margin by the PX.