Firms cold to power trading model

Despite the enthusiasm shown by the Central Electricity Regulatory Commission in setting up a power trading exchange in the country, power trading companies are of the opinion that the proposed exchange may be an idea that is ahead of its time.

"This model will not work as, for government-owned entities, decisions on the spot are not practically feasible. There should also be a sufficient number of players to put up the margin money, as well as be responsible for paying up the money for setting up the exchange," officials of power trading companies told Business Standard.

Suggesting a better way to set up the power exchange, officials said, "One way is to use the commodity exchanges platform and use the money for designing the software platform. The commodity exchanges are willing to give their platform for free."

In such a scenario, the upfront capital cost will be negligible and the exchanges will earn money through commissions.

The industry experts believe that it may cost around Rs 60 crore to build a new exchange, while in the case of using the commodities exchange as a platform, the costs will be minimal.

The exchange is expected to lead to more competitive prices for power, as it will pool power from various sources. The commission (CERC) will soon start public consultations aimed at finalising its contours.

"The exchange will be managed by an impartial team and will free buyers and sellers of power from entering into long-term exclusive contracts," CERC Chairman AK Basu had said earlier.

The power regulator believes that this step will bring the country's power sector closer to efficiencies that are witnessed globally.

While a bulk of the country's power is locked up in long-term contracts, the exchange will give new projects the option to keep some generation out of the lock-in agreement.

There exists an inter-regional power transfer capacity of around 6,000 Mw in the country, which is expected to increase further to about 9,500 Mw in the next few years. At present, Adani Exports Ltd, NTPC Vidyut Vyapar Nigam Ltd, PTC India, Reliance Energy Trading Ltd and Tata Power

Trading Co Ltd are among the companies involved in power trading in the country.