Faster development of market to help control prices

Written by Sanjay Jog | Updated: Sep 20 2009, 04:27am hrs
Indian Energy Exchange (IEX), which has attracted 170 participants in 14 months of operation, hopes to attract more volumes. In an exclusive interview, IEX MD & CEO Jayant Deo spoke to FEs Sanjay Jog on its plans and regulatory hurdles. Excerpts:

Given that the demand and supply gap is widening with every passing day, how was your experience operating the exchange Have utilities, generators, distribution, regulators and policy makers accepted the fact that power exchanges are here to stay

Indian energy Exchange (IEX) is Indias first-ever, nationwide, automated, and online electricity trading platform. It is also the first power exchange in the world where supply falls short of demand. All exchanges around the globe have substantial spinning reserve. Since 2004, we have taken lead in canvassing the need for power exchange, primarily for attracting new investment for capacity addition. Price discovery is incidental.

All the stakeholders and policy makers, including regulators have shown faith in the exchange. The fact that IEX has attracted 170 participants in 14 months of operation speaks for itself. Recently, Forum of Regulators comprising of chairpersons of all Regulatory Commissions in the country visited IEX for a hands-on experience of the new concept. Similarly, Central Electricity Authority chairman and his team visited IEX for understanding its detailed working and new products. The power ministry is supportive and appreciates IEX. Our flawless operations with clock-work precision have helped in the acceptance of the concept of power exchange in India.

What is the turnover achieved since its inception and forecast for 2009-10

IEX since its inception on June 27, 2008 till March 31, 2009, has traded 2.6 billion units (kWh). For the period between April 1, 2009 and September 30, 2009, we expect the trade volume to be over 2.2 billion units (kWh).

What are the products being offered When can you break even

We started with a day-ahead market. In September 2008 we applied for term-ahead market. We got the approval and launched day-ahead contingency, intra-day, daily and weekly contracts on September 15, 2009. We did seek permission for month-ahead market which has not been approved as of now. After it is approved, we should be able to attract adequate volumes.

What major regulatory and policy hurdles the exchange is facing

One should understand that an exchange is a self regulating institution and hence it should be given adequate latitude for innovation in market development in a deficit scenario. Comparison and precedences of the exchanges operating in surplus scenario in western world. Regulating exchanges in this power starved country is self defeating.

Certain key clauses of Electricity Act, 2003, need to be understood and implemented. The provision under the clause of 86.1 (a), shifts open access category of consumers from regulated tariff to market prices. This model of compulsory shifting of large consumers in a phased manner to market prices is being followed by the developed countries for competitive market development. This, if followed here, would accelerate the development of power sector.

Faster development of market and right signal to the investor will only control higher prices. The price ceiling gives negative signals to the investor community and financial institutions.

The turnover at your exchange has been quite low than what was expected by you. What are the reasons behind this

We expected to have some descent time limit for introducing new products. However, it has taken one year to get regulatory clearances. Month-ahead contracts are yet to be approved.

Whats the way forward Are you seeking more equity participation and attracting more members

We continue our endeavor to create awareness and reach out to all stakeholders to bring them on the platform. As far as I understand, power sector would follow housing sector in India. Three decades ago the housing stock was unavailable. At some point of time government started constructing the DDA Housing Board. Gradually the broker/builder/developer community got engaged along with self help groups (cooperative societies). Today, promoters are developing new cities in the most competitive manner rather than just constructing one building. The power sector, too, will follow suit.