PXIL seeks CERC's approval for introduction of two day spot product

IEX opposes the move, says it will lead to poor price discovery

Power-deficit states and utilities might get more products to be traded on the exchanges. The Power Exchange India (PXIL) - promoted by the National Stock Exchange (NSE) and National Commodity and Derivatives Exchange - has sought the permission of the Central Electricity Regulatory Commission (CERC) to introduce ‘two-day ahead spot’ (2D-Spot) and ‘extended evening day ahead spot’ products. The CERC has directed PXIL to submit an affidavit by January 30 in this regard.

PXIL’s existing products are ‘day ahead’, term ahead’ and ‘renewable energy certificates’.

India has two power exchanges - PXIL and Indian Energy Exchange (IEX). Both the exchanges offer almost similar products. IEX's daily turnover is about 75 million units, while PXIL's is about five million units.  PXIL’s managing director and CEO M G Raoot told Business Standard that 2D-Spot will give one more chance for the players to fulfil their requirements. At present, the day-ahead market is the only connective market wherein the trading is done today for the delivery of power tomorrow. In case the bidders do not get their requirement fulfilled, they have no other chance to arrange for their needs.” Raoot said the 2D-Spot product would address this shortcoming.

Raoot added that India has adopted multiple exchange model where the power market needs to be a balanced one. “The 2D product will give an opportunity to taste the flavour on both the exchanges. However, the introduction of 2D-Spot will need minor changes in open access regulations and grid code,” he noted. PXIL has told CERC that the day-ahead market is the flagship product with 99 per cent marketshare, while other products such as bilateral, weekly, any day, and contingency constitute only one per cent.

Liquidity would get split and it does not matter whether the transmission corridor is utilised one day or two days before. According to grid code, planning should happen eight days ahead. Also, open access customers have a flat requirement.

However, according to IEX, 2D-Spot would divide the liquidity, leading to poor price discovery. “The participants trade on the day ahead market in distress situation. Generators bid at marginal cost and buyers bid at marginal price in the day ahead market. By operating a 2D-Spot market, the price discovery on day ahead would not be a correct one, thereby giving distorted price signals to the participants. If 2D-Spot is allowed, then the participants may shift to 2D-Spot depending on the prices discovered, which would not be a correct one,” said IEX.

An IEX official confirmed the exchange has raised objections against the PXIL proposal.