Tough going for NTPC's power exchange plans

While the first power exchange in the country -- the Indian Energy Exchange Ltd, promoted by Financial Technologies India and Multi Commodity Exchange (MCX) -- is in the process of finalising its members, the second one, proposed by NTPC, is facing birth pangs.

A power exchange (PX) functions on the lines of commodity exchanges and provides a platform for buyers, sellers and traders of electricity to enter into spot and forward contracts.

The proposal for the second PX has been anchored by the NTPC and National Commodity and Derivatives Exchange (NCDEX), with National Hydroelectric Power Corp (NHPC), the Power Finance Corporation (PFC) and the National Stock Exchange (NSE) as partners.

Another willing partner, transmission major Power Grid Corporation of India (PGCIL), has been disallowed participation in any exchange by the power regulator.

According to a senior official of the central electricity regulatory commission (CERC), "a system operator like PGCIL cannot be part of any power exchange."

Since the company is mandated to be impartial and neutral in allocation of transmission links, which are critical to the success of any exchange, it cannot itself be a promoter in any exchange.

With PGCIL out, NTPC along with NHPC and PFC would own a 50 per cent stake in the yet-to-be-floated firm while NSE and NCDEX would own the other half. "The new company will be registered in the next few days," said an official.

The commission had refused to clear the proposal to set up power exchange last month, as the joint venture company was yet to be floated.

"The NTPC-NCDEX consortium is yet to approach the CERC with the new company made exclusively for setting up the PX," added the official.

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.