A welcome initiative
CERC notification for online trading in interstate power market is welcome.
By ET Bureau |
It is welcome that electricity regulator CERC has notified norms for online trading and exchange in the interstate power market. In tandem, we need “open access” for line capacity and rationalisation of transmission charges. While the national power scenario is one of shortages, overall, at any given time, there are areas and entire regions that are nominally power surplus.
Hence the rationale to expedite power exchange cross-country and make better use of existing capacity. It would mean stepping up supply by incurring only marginal costs. Yet a panoply of extant rigidities in supply and evacuation stultify pan-India power exchange. The new norms for inter-state sales would be applicable to all contracts transacted on power exchanges, other exchanges and also bilaterally, that is, over the counter, OTC. CERC has mandated that service charges on power exchanges do not exceed 0.75% of the transaction value for ‘day ahead’ and ‘term ahead’ contracts .
Such charges would be separate from those levied by the power exchange, transmission (open access) charges, and other charges payable by the national or regional or state load despatch centre, plus statutory taxes etc. This is too high. It is precisely because of high transaction costs that electricity trading accounts for a tiny fraction of total supply. We need systemic overhaul and reforms to purposefully rev up the power market.
The CERC norms require a clearing corporation (CC) for setting up power exchange. It makes sense to set the minimum net worth condition of eligibility low, but why limit the number of exchanges to two? Competition among exchanges is a desirable means to lower transaction costs and enhanced robustness of systems. Any exchange that meets the regulatory norms laid out should be allowed to operate. Nor does it make sense to deprive an exchange of an investor with a sizeable stake. A condition that no investor can have more than 5% stake in an exchange will hinder creation of new exchanges and also leave exchange managements relatively unaccountable.
Hence the rationale to expedite power exchange cross-country and make better use of existing capacity. It would mean stepping up supply by incurring only marginal costs. Yet a panoply of extant rigidities in supply and evacuation stultify pan-India power exchange. The new norms for inter-state sales would be applicable to all contracts transacted on power exchanges, other exchanges and also bilaterally, that is, over the counter, OTC. CERC has mandated that service charges on power exchanges do not exceed 0.75% of the transaction value for ‘day ahead’ and ‘term ahead’ contracts .
Such charges would be separate from those levied by the power exchange, transmission (open access) charges, and other charges payable by the national or regional or state load despatch centre, plus statutory taxes etc. This is too high. It is precisely because of high transaction costs that electricity trading accounts for a tiny fraction of total supply. We need systemic overhaul and reforms to purposefully rev up the power market.
The CERC norms require a clearing corporation (CC) for setting up power exchange. It makes sense to set the minimum net worth condition of eligibility low, but why limit the number of exchanges to two? Competition among exchanges is a desirable means to lower transaction costs and enhanced robustness of systems. Any exchange that meets the regulatory norms laid out should be allowed to operate. Nor does it make sense to deprive an exchange of an investor with a sizeable stake. A condition that no investor can have more than 5% stake in an exchange will hinder creation of new exchanges and also leave exchange managements relatively unaccountable.
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