The Central Electricity Regulatory Commission (CERC) has allowed Indian Energy Exchange (IEX) and Power Exchange India (PXI) to launch additional contracts for trading on weekly basis upto one month in advance and also allowed one more trading window for day ahead contract and contracts to be traded within a day.
IEX and PXI have been asked to introduce these contracts from September 15. However, CERC has not permitted monthly contracts and intra-state contracts in these exchanges. Both IEX and PXI have welcomed the CERC order.
The term ahead contracts are trade-to-trade contracts where squaring off transactions would not be possible. These are kind of physical forward contracts different from the futures contracts in which transaction can also be squared off and payments are made on mark-to-market basis.
Currently, IEX and PXI are engaged in day ahead trading where utilities can transact only for 24 hours of the next day. IEX’s daily trade volume is of the order of around 15,000 megawatt hours (Mwh) while PXI clocks a trading volume of 1,500 Mwh.
CERC chairman Pramod Deo told FE, “There is a clear signal for investors that term ahead market when developed would be deflection of market forces. Similarly, CERC’s draft order to cap electricity prices for 45 days between 10 paise and Rs 11 per unit is to take care of distortions.”
CERC said regional day ahead contingency contracts, region-wise daily contracts, intra-day contracts and weekly contracts (trading one month in advance with a delivery period of one week) would be for physical delivery and would be non-transferable. Financial settlement of these contracts without scheduling would not be permissible. IEX and PXI can apply closed auction with uniform price solution or continuous electronic trading with trade-for-trade settlement. For region-wise weekly contracts, only closed auction with uniform price solution would be used.
CERC has made it clear that no modification of the price discovery mechanism would be allowed without its prior approval. The approved contracts are power contracts within constant MW to be supplied during the contract period. The applicant would abide by the CERC (open access in inter state transmission) Regulations, 2008, as amended from time to time, for open access and scheduling procedure. Moreover, in case of contingency or grid disturbance, the directions of the load despatch centres would be followed to ensure grid security.
CERC asked IEX and PXI to keep and prudent margins in order to ensure adequate payment security.The methodology for calculation of various margins would be disclosed to the participants before they enter into any trade. Meanwhile, CERC has dismissed petition filed by Tata Power Trading Compay’s petition seeking intervention in the proceedings on separate pleas filed by IEX and PXI allowing them to enter into term ahead contracts.