MCX joins CERC-FMC turf war on power trading

Multi Commodity Exchange (MCX) has filed a review petition at the Central Electricity Regulatory Commission (CERC) against the regulator?s order of April 29 that it has jurisdiction to regulate the forward contracts in electricity.

However, MCX has argued that CERC’s order is erroneous and it needed to be reviewed. CERC has convened hearing on the MCX review petition on July 28. MCX sources confirmed that it sought the review of CERC order.

CERC in its order had said till its regulations and guidelines for electricity forward contracts come into effect MCX transactions in forward contracts in electricity will be governed by CERC?s existing orders. MCX has not been barred from transactions in forward contracts. However, CERC?s orders would govern it. MCX had submitted that by virtue of the notification issued by the Centre only FMC had the jurisdiction to regulate the forward contracts in electricity through an association recognised under section 6 of the 1952 Act.

MCX in its review petition said that CERC while on one hand accepted Forward Market Commission’s (FMC) authority regarding foward contracts, on the other hand it has barred MCX from launching daily and weekly products.

Further, CERC vested with jurisdiction overreaching exclusive regulatory domain over both physical trading in electricity as also future and forward contracts which are basically financial investments based on electricity.

Moreover, MCX said that CERC has brought within its jurisdiction even the FMC which is a specialised regulator created under separate statute has jurisdiction over all such financial instruments such as forwards and future contracts.

It must be mentioned here that CERC in its order had ruled that MCX and other commodity exchanges permitted trading of forward contracts by FMC at their platform will be governed by the orders, guidelines, regulations and other prescriptions of CERC since they are not inconsistent with the provisions of the Forward Markets Contracts (Regulation) Act, 1952.

CERC noted that FMC exercises jurisdiction over the forward contracts in accordance with the provisions of the 1952 Act as they cannot be said to be inconsistent with those of the 2003 Act and the two statutes operate in independent fields.

According to CERC, it has, while promoting development of market in power, has authority and jurisdiction to scrutinise the activities of firms to ensure that they are not acting in a manner to jeopardize the consumers’ interest. FMC, by virtue of the functions assigned to it under the 1952 Act may not be able to focus its regulatory oversight on protecting the interest of electricity consumers and the integrity of the electricity sector.