BL reported that Multi Commodity Exchange has launched futures trading in electricity for the first time in India.
Globally, Nordpool in Sweden, Norway, Finland and Denmark, Inter Continental Exchange in UK, Powernext SA in France, European Energy Exchange in Germany, PLM in the US and Australian Securities Exchange in Australia offer electricity futures trading platform.
MCX received the approval from market regulator Forward Markets Commission for launching weekly and monthly electricity contracts. The exchange will launch eight weekly contracts and 4 monthly contracts. The first trade was executed in the March monthly contract at INR 7,300 a MWH. On day one, trading in electricity futures was lacklustre. In the first session, which ended at 5 pm, there were only two trades valued at INR 3.5 million on a volume of 48 MWH. The open interest was zero.
As per report, the contract trading unit will be 1x24 MWH with tick size as INR 1 per MWH. The delivery will be optional for both buyers and sellers and due date rate will be the average of daily system prices of day ahead market of Indian Energy Exchange for delivery during the contract week or month. It will be traded from Monday to Saturday between 10 am and 11.55 pm, except Saturdays which will be from 10 am to 2 pm.
The report added that the annual market size in 2007-08 was INR 2 million that is about 665 billion units. The present short term market per year is about 4% to 5% of the total market which works out to INR 13,500 crore which is equivalent to about 30 billion units.
Mr Joseph Massey MD MCX said that “With the launch of electricity futures, MCX has further diversified its basket of energy products after crude oil, furnace oil, natural gas and aviation turbine fuel. Now the industry will be able to mange price risk on energy related raw material or output better on MCX, which already accounts for 98 per cent of the entire energy related futures market.”
Mr Massey said that the launch of electricity futures will smoothen the price curve in the medium to long run that will help the market participants to facilitate price discovery and take an informed decision looking at the futures prices.
(Sourced from Business Line)
