CERC staff paper bats for innovation in power trading business

Bundling & unbundling of trading contracts will help provide customised energy solutions

In a bid to further promote the development of the power market, the Central Electricity Regulatory Commission's (CERC) staff discussion paper has made a pitch for allowing a more liberal interpretation of trading margins applied on short term transactions undertaken by traders and incentivising traders to innovate for the larger interest of markets and consumers.

The staff paper, which is uploaded on CERC's website seeking feedback from various stake holders, has proposed that a trader be allowed to buy electricity from different generators or sellers at different prices and sell it to a single distribution company (discom) or buyer at one price.

Besides, the trader could be allowed to buy electricity from a single generator at one price and sell it to multiple buyers (discom, industrial consumer) at different prices.

Citing Section 66 of the Electricity Act, 2003, the staff paper said allowing aggregation (bundling) and disaggregation (unbundling) of contracts by traders would provide traders a way to innovate by creating various kinds of products which serve the needs of buyers and sellers and provide customised energy solutions.

Maharashtra Electricity Regulatory Commission's former member and Indian Energy Exchange's former MD & CEO Jayant Deo welcomed these proposals made in the CERC's staff paper.

However, he told Business Standard: “The CERC staff paper does not focus on market development. The generation capacity has more than doubled during the last five years whereas the short term market has increased only by 50 per cent, and has been almost stagnant for the last three years. There is a need to make equitable distribution of transmission capacity, particularly for the short term market. There is a need to remove scheduling and availability-based tariff metering for below 10 MW consumers, according to model regulations of the Forum of Regulators.”

Further, M G Raoot, MD & CEO Power Exchange India Ltd said the CERC staff paper highlighting the new methodology of deciding the margin for power traders (through aggregation and disaggregation) appeared to be lucrative to boost trading in the power sector and ensure optimal utilisation of resources. “Our power market is an evolving one. In order to get perfection in marketing mechanisms, we need to constantly explore various methodologies and market designs duly supported by regulatory framework,” he said.

According to the staff paper, with aggregation and disaggregation more customised solutions would be possible. Hence, the discoms would be able to balance their demand – supply portfolio better and cost effectively, thus following their load curve more closely, reducing their procurement cost and hence, reducing load shedding.