Power Exchange India questions FMC jurisdiction over power futures

The Power Exchange India (PXI) and Forward Markets Commission (FMC) are at loggerheads with the country’s second largest commodity bourse questioning the market regulator’s authority in dealing with trading in electricity futures.

In a petition with Central Electricity Regulatory Commission (CERC), Power Exchange India (PXI) has said electricity was not a commodity and therefore FMC could not have any jurisdiction over its futures trading.

However, FMC has sought dismissal of the “misconceived” petition, with its Chairman B C Khatua saying it is the only authority with jurisdiction over the issue.

“FMC alone has jurisdiction over futures trading. The petition is therefore misconceived and should be dismissed by CERC for lack of jurisdiction,” Khatua said. Under Forward Contract (Regulation) Act, 1952 (FCRA), FMC alone is competent to do so, he said.

Last week, MCX began to offer electricity futures on its platform after getting approval from FMC. The exchange had approached FMC after its subsidiary Indian Energy Exchange (IEX), which deals in the spot trading of electricity, failed to get permission in time for electricity futures.

PEI has also made MCX and IEX as a respondent apart from FMC. Questioning the FMC’s jurisdiction in dealing with electricity futures, PXI submitted in the petition that electricity is not a commodity as envisaged under the provisions of FCRA. Further, the rules and the diverse notifications issued under FCRA do not provide any authority to FMC to deal with electricity.

It added that any activity of power exchange has to be approved by the CERC. Therefore, any permission to launch electricity futures can be considered only by CERC.

Last week, MCX began to offer electricity futures on its platform after getting approval from FMC. The exchange had approached FMC after its subsidiary Indian Energy Exchange (IEX), which deals in the spot trading of electricity, failed to get permission in time for electricity futures.

PEI has also made MCX and IEX as a respondent apart from FMC. Questioning the FMC’s jurisdiction in dealing with electricity futures, PXI submitted in the petition that electricity is not a commodity as envisaged under the provisions of FCRA. Further, the rules and the diverse notifications issued under FCRA do not provide any authority to FMC to deal with electricity.

It added that any activity of power exchange has to be approved by the CERC. Therefore, any permission to launch electricity futures can be considered only by CERC. The petitioner also requested CERC to restrain MCX from dealing in electricity futures saying it is not a power exchange approved by the power regulator.

PEI argued that the impugned contracts, if allowed to be traded over the commodity exchange of the MCX, as proposed, will severely distort the electricity market and cause impediments in the operations of its power exchange.

Para 5.7.1(d) of the National Electricity Policy mandates that any development in the power exchange has to be carried out by way of a consultative process with all concerned. This was also reiterated in the CERCs order of September 19, 2008. However, MCX appears to be avoiding the entire consultative process and the scrutiny of the CERC, PXI said.

This story has been modified to reflect the following correction: 
NCDEX has clarified that it is not an involved party in the dispute between Power Exchange India (PXI) and the Forward Markets Commission (FMC), as wrongly stated in this report. PXI is promoted by NCDEX and NSE. The error is regretted.