Multi Commodity Exchange alleged CERC trying to deprive it from entering into forward contracts in the power market.
A dispute between the Central Electricity Regulatory Commission (CERC) and the Forward Markets Commission (FMC) on jurisdiction over forward contracts in the power market will come up for hearing in the Bombay High Court tomorrow.
The Multi Commodity Exchange(MCX), in a writ petition, had said that CERC’s previous orders and the Power Market Regulations, 2010, sought to deprive it from entering into forward contracts. MCX further stated that it was authorised by FMC to launch weekly electricity futures contracts/derivatives and was also notified by the government of India as a “recognised association”.
The petitioner argued that CERC had erred in stating that Section 66 of the Electricity Act bestowed on it the power to regulate forward trading in electricity, merely because it required it to endeavour to promote the development of a market (including trading) in power.
MCX Chairman Venkat Chary told Business Standard, “CERC orders issued on April 28, 2009 and January 11, 2010, and CERC Power Market Regulations, 2010, are illegal, capricious and bad in law. CERC’s mandate is only to regulate physical market and forward markets fall outside the physical market development domain. Therefore, CERC’s orders and regulations are ultra vires.”
CERC refused to comment on the issue. However, CERC, while releasing power market regulations, had clearly said that the intention was to make the regulations forward-looking, and to have long shelf life with mid-course upgradations as may be required from time to time.
This, according to the order, was attempted by introducing the concept of derivatives contracts, financially settled exchange traded derivatives and other innovative contracts such as capacity contracts, ancillary services contracts, renewable energy certificates.
However, derivatives, ancillary services and capacity contracts would be introduced from a date to be notified when the supply deficit scenarios ebbs and sufficient liquidity gathers in the day-ahead market.
MCX alleged that the CERC was using its resources to usurp jurisdiction over Electricity Forward and Futures Contracts and it has sought to ensure that forward trading in electricity contracts with the option of financial settlement were not traded upon the commodity exchanges being regulated by the FMC.
According to MCX, “CERC being aware of the fact that term-ahead contracts fall under the jurisdiction of the FMC under the FCRA, 1952, is trying to confer jurisdiction not vested in it under law, hence it has advised the Central Government to invoke it powers under Section 27 of the Forward Contracts (Regulation) Act (FCRA) to exempt power exchanges to deal in non-transferable specific delivery electricity contracts from all provisions of FCRA.”
Furthermore, MCX claimed that CERC was trying to enforce the CERC (Power Market) Regulations 2010 by overreaching the process of law so as to usurp jurisdiction and frustrate MCX from exercising its legally entitled right derived from FMC under the FCRA.
