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| Companies planning to foray into the power trading business may be required to bring in a minimum capital of Rs 10 crore. In a concept paper on inter-state power trading, the Central Electricity Regulatory Commission (CERC) has also prescribed an annual licence fee of Rs 25 lakh to be paid by such companies.
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| According to the power regulator, while the minimum capitalisation has been proposed at Rs 10 crore, utilities trading between 50 and 100 million units a month might be required to infuse Rs 15 crore in the business. Companies trading between 100 and 150 million units a month may have to bring in Rs 25 crore.
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| The capitalisation norms are based on the quantum of power traded by the utilities. As per the band, for trading between 150 and 200 million units a month, the regulator has prescribed a minimum capital employed criterion of Rs 35 crore and for trading 200-250 million units, Rs 50 crore.
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| For obtaining a trading licence, prospective companies will have to remit an application fee of Rs 5 lakh to the CERC and an annual licence fee of Rs 25 lakh. Till the Electricity Act, 2003, came into force, power trading was not a distinct licensed activity and there were no capital or licence fee norms.
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| The regulator has set the conditions to ensure that power traders can cover the financial liability arising out of the maximum trade transacted by them. The entities will further be required to intimate the regulator before they can trade more than what is prescribed in the original licence.
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| Besides the financial conditions, the regulator has also set technical standards for prospective traders. Not only should they be required to understand the market and the operations of the system, they should also be able to conduct commercial transactions. Traders should further be capable of communicating with business partners and system operators by installing adequate communications facilities.
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| Three forms of trading contracts have been envisaged: long-term bilateral contracts, short-term forward trading contracts and spot trading contracts.
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| The CERC was entrusted with the task of issuing licences to entities planning to take up inter-state electricity trading. Section 52 of the Electricity Act had authorised the regulator to specify the capital adequacy norms, technical requirements and credit worthiness for undertaking such trading. It also had to set the margin in inter-state trading.
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The power equation
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Since 1999, the Power Trading Corporation has been the sole entity trading in electricity between states
The trading margin at present is not set by the regulator
The Power Trading Corporation charges around 5 paise per unit from the buyer as trading margin
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