Indian power regulators have proposed a uniform price discovery through pooling of bids across power exchanges for optimal use of the transmission system , in addition to strict rules for electricity markets, including the maintenance of a stock exchange transaction fee check.
However, the industry said that strict regulations and unnecessary interventions by the regulatory committee would hinder the deepening of the electricity market in the country that has just begun to evolve. It said that the regulatory interventions raise questions about the concept of free trade.
On Saturday, the Central Electricity Regulatory Commission (CERC) issued draft Power Market Regulations 2020, which provide for a new concept called ‘Market Coupling,’ meaning a process of collecting bids from all power exchanges and matching them to discover a uniform market clearing price. The work will be carried out by the ‘Market Coupling Operator,’ an entity to be notified by the regulator.
“This is just an enabling provision for optimal utilisation of transmission corridors and the surplus capacity. Market coupling is prevalent in Europe,” said a person in the know of the development.
The proposal, supposedly the longest of all CERC regulations, also proposed to allow long-term future power-exchange contracts by removing the current 11-day restriction.
The regulator also sought to keep in check the amount of transaction fees charged by power exchanges. “No power exchange shall charge a transaction fee in excess of the fee as approved by the Commission,” said the draft. Operational power exchanges will be required to obtain approval of the transaction fee within three months of the notification of these Regulations.
“As things are evolving, the depth of markets is increasing,” said the person quoted above. “The RTM markets have picked up very fast and the markets will see addition of new products soon. The draft was under deliberation since long and has been brought out timely for all checks and balances. The role of regulator becomes all the more important when the markets become deep. The draft has enabling provisions covering everything for balancing the interests of the public at large.”
Regulations come within the framework of the power ministry’s order 10 days ago, allowing electricity to be traded as other commodities with forward contracts and derivatives on exchanges.
The order established a ten-year jurisdictional spat between CERC and the Securities & Exchange Board of India ( Sebi). Now, long-term delivery contracts are likely to be traded on power exchanges under the jurisdiction of CERC, while derivative contracts are likely to be traded on commodity exchanges under Sebi. The Order asked the two regulators to take appropriate measures to implement futures contracts.
Moreover, India is proposing to move to the global practice of selling full power generation through the spot market to lower tariffs by promoting efficient plants and resisting periodic aberrations that benefit a few companies under the concept of market-based economic electricity dispatch.
The latest proposal also provided for enhanced powers for regulators to control malpractice in electricity trading. The Commission invited comments on the proposal by 7 August and scheduled a virtual public hearing on that day.
The first Power Market Regulations were issued in January 2010, after which two amendments were made by means of notifications to the Gazette.
