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| Power exchanges launch long-term trading products |
| Sudheer Pal Singh / New Delhi Sep 16, 2009, 00:24 IST |
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Experts believe the move will address power shortfall, mainly in north.
In a landmark development for the power market in the country, power exchanges today launched products for long-duration trading of electricity at their electronic platforms.
The two power exchanges — Indian Energy Exchange (IEX) and the Power Exchange India Ltd (PXIL) — were so far carrying out only short-term (day ahead) trading. The exchanges have begun inviting bids for long-term (term-ahead) sale and purchase of power — currently an exclusive domain of power traders like PTC India.
Experts believe that the move, the approval for which was given to the two exchanges last month by the Central Electricity Regulatory Commission (CERC), would go a long way in addressing the chronic power shortages in the country, especially the perennially power-starved states of the northern region.
The exchanges will be able to undertake trading in four additional contracts — intra-day contracts for trading on a daily basis, day-ahead contingency contracts for meeting sudden demands for power, daily contracts for trading power to be delivered in the following week and lastly, weekly contracts for power to be delivered in the following month.
“Earlier, one could trade only in 24 hours. Now, one can trade power for any hour of the day, any day of the week and any week of the month,” said Jayant Deo, MD and CEO of IEX. “If some consumers find that they have sudden demand for power and require additional power, say in the evening peak hours, they will be able to trade,” he added. A major benefit of the long-term trading at the exchanges is for states which will now be able to avoid “load-shedding by tying up power on a long-term (week or month-ahead) basis.”
Deo also agreed that the new development would significantly increase the volume of power traded on it. “Our volumes should go up because we have more avenues now.”
He, however, said that the exchange’s entry into term-ahead contracts would not impact the business of power traders, as any likely affect would be offset by the increase in the number of people which will come to the market now. “Also, traders too can trade power at the exchange,” he said.
At least one power trader, however, said new measures would have to be put in place to avert any impact on its volumes owing to the new development. “It will affect the total market, not only us. But we will definitely come up with some strategy to see that they do not affect our volumes,” said a senior official from one of the biggest power traders in the country.
IEX had also sought permission from CERC to introduce intra-state contracts, but the commission denied it, saying it fell outside its purview. IEX had also sought approval for weekly contracts to be available for trading up to three months, while the commission allowed only month-ahead trading under the category, citing the price and volumetric risks associated with the term-ahead market.
Industry experts have welcomed the launching of longer duration contracts by the exchanges. “This will allow buyers and sellers to lock sale and purchase agreements for the future thereby reducing the risk as they will know beforehand the price and availability scenario. Also, this will give a benchmark by acting as an indicator to all the stakeholders which they can use for the planning of their own projects,” said Kuljit Singh, head (transaction advisory services), Ernst & Young.
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