The news that India?s first power bourse?the Indian Energy Exchange (IEX)?will start operations by the first quarter of next fiscal is good news for energy-starved states and consumers. The bourse is expected to bridge, to a certain extent, the huge demand-supply gap that planned capacity addition of more than 80,000 mw will not, certainly not in the short term. Industry has a number of captive power plants which lie underutilised. And with merchant capacity expected to come on stream soon, there is need to absorb surplus generation into the national grid. That?s precisely what the demutualised power exchange hopes to do by providing an electronic platform for short-term contracts that will enable efficient price discovery and price risk management in the electricity market. At present, nearly 18 billion units of power are traded in India?a figure that is expected to increase manifold. PTC India, which used to enjoy more than 80% share of such largely bilateral contracts, has seen its virtual monopoly dwindle to 60% as other traders enter the fray. The Central Electricity Regulatory Commission (CERC) has so far issued 17 licences for inter-regional trade, though it needs to lay down strict qualification norms before issuing new licences.
However, although the CERC has put in place comprehensive guidelines for such power exchanges, their efficacy will be limited unless open access becomes reality. A large number of state electricity regulatory commissions impose heavy cross-subsidy charges that discourage open access and, thereby, smooth energy trading. The power ministry, which recently brought together power regulators and states to arrive at a consensus on open access, must push more aggressively along this road if power is to flow smoothly to energy-deficient states. Moreover, though the development of merchant power plants is welcome for short-term trading, the evacuation of power would continue to be a major issue if they are located far from load centres. Furthermore, regulators need to allow the introduction of financial products such as futures, hedging, swapping and derivatives, which will increase the depth of the power trading market. Power traders need to think of long-term gains instead of overnight fortunes. Only by ironing out these wrinkles will the true benefits of the long overdue energy exchange be truly realised.
