December 02, 2008

Power trading exchanges in the offing in India

It is reported that 2 consortiums are planning to set up national power exchanges and are in the process of getting the regulatory nod from the Central Electricity Regulatory Commission for setting up the exchanges.

As per report a power exchange would basically function on the lines of a commodity exchange and provide a platform for buyers, sellers and traders of electricity to enter into spot and forward contracts. It would offer a market based institution for providing price discovery and price risk management to the generators, distribution licensees, traders, consumers and other players in the sector.

As per report, the move is lead by a JV company being promoted by NTPC Ltd, Power Grid Corporation of India Ltd, Power Finance Corporation, National Hydroelectric Power Corporation and National Commodities and Derivatives Exchange Ltd is in the process of obtaining. The second contender is a Financial Technologies Ltd MCX led venture. PTC India Ltd has evinced interest in partnering either or both the consortia and is likely to go in with the venture that bags regulatory clearance first.

CERC issued guidelines in 2007 for grant of permission to operators wanting to set up and operate a power exchange in the country. Without stipulating a cap on the number of exchanges that can be set up by prospective players the regulator had broadly prescribed the need for clear ring fencing between ownership management and participation in the proposed power exchange and the requirement for an efficient financial settlement and guarantee system.