Power Exchange India to re-launch 'day-ahead spot' contract in six weeks

'Day-ahead' is a closed auction in which both buyers and sellers quote their prices daily between 10 a.m. and noon for delivery the next day

Power Exchange India Ltd (PXIL), the electricity trading platform promoted by the National Stock Exchange (NSE) and National Commodity & Derivatives Exchange (NCDEX), is planning to re-launch ‘day-ahead spot’ contracts in the next six weeks.

A day-ahead contract is a double-side closed auction in which both buyers and sellers quote their prices daily between 10 a.m. and noon for delivery the next day, depending upon uniform price auction on 15-minute-time-slot basis.

Launched in 2008 with NSE, NCDEX and several large utilities as its shareholders, PXIL turned unprofitable and suffered great deal of attrition, due to which its networth turned negative by 2017. PXIL is currently a zero-debt company.

Over the past two years, the exchange has revived operations, retained its members base and enhanced trading in ‘term-ahead’ and ‘REC’ contracts, where it currently has a 50 per cent and a 30 per cent market share, respectively. It is now making profit month-on-month, which has boosted its networth base to Rs 21.5 crore without the need to raise fresh capital from its existing shareholders or any new shareholders.

“We have two years to meet the minimum networth criterion of Rs 25 crore, which is achievable. Both promoter shareholders -- NSE and NCDEX -- are confident. Now, we are looking to re-launch ‘day-ahead spot’ contracts in the next six weeks,” said Prabhajit Kumar Sarkar, Managing Director and Chief Executive Officer, PXIL.

By the end of financial year 2020-21, PXIL is aiming to achieve 30 per cent of market share in ‘day-ahead spot’ contracts on accelerated turnover basis. Currently, Indian Energy Exchange (IEX) controls about 99 per cent of this market.

“We have a membership base running into hundreds, with leading power generation and distribution companies enrolled on our platform either as a member or a client. We are continuously making our efforts to expand our membership base without unnecessarily lowering our transaction fees, or annual or membership fees. We are in talks with power generation and distribution companies, state utilities and (are engaged in) cross-border integration with Bhutan, Nepal and Bangladesh to expand our horizon,” said Sarkar.

At present there is a regulatory overlap between the Securities and Exchange Board of India (Sebi) and the Central Electricity Regulatory Commission (CERC). Currently, contracts below T+11 (delivery till 11 days of trading) is regulated by CERC. Now the Union Ministry of Power is understood to have intervened and there are hopes that all physical delivery contracts will be under CERC, whereas financial contracts will come under Sebi’s purview.

Power Finance Corporation (PFC), Gujarat Urja, the state utilities of West Bengal and Madhya Pradesh, JSW Energy, Tata power Trading and GMR are other shareholders in PXIL.

“We approached members of the energy value chain to convince them about fair price discovery in power trading business. In the absence of fair competition, one single platform creates a virtual monopoly. With an alternate platform available, traders would be able to discover healthy trading opportunities,” said Sarkar.

PXIL charges a transaction fee of Re 0.02 per unit on cleared volumes for buyers and sellers in addition to nominal membership and client registration fees. All these fees and costs are commensurate with industry standards and have remained unchanged for over a decade now.

With a completely revamped technology platform, increased outreach to all its members and a motivated and energised team, PXIL is geared up to relaunch the ‘day-ahead spot’ segment and provide a competing platform for all market participants.