Electricity regulator mulls steps to improve power trading

The Central Electricity Regulatory Commission is considering several measures to improve power trading on exchanges, including starting evening trading.

These measures, which sought to improve market design in power exchanges, were discussed in the central advisory committee meetings chaired by the CERC chairman.

"Evening trading could bring the market much closer to real-time demand.

This is because traders or bidders could assess the power demand more accurately, since they would be operating in the evening, much closer to real time when one actually needs power for major uses.

"This would eventually mean taking the day-ahead market closer to delivery time to help participants bid more accurate quantities," said an official.

The CERC is also considering 15-minute trading, against the current one hour, to bring the trading closer to a real-time basis.

Officials explained that a 15-minute block for trading would require introducing availability based tariffs across states.

This is currently prevalent in central generating stations and state beneficiaries.

ABT is a frequency-based pricing mechanism for electric power in which power is priced depending on real-time availability.

Thus, it is aimed at bringing about more responsibility and accountability in power generation and consumption.

"Thus, if we are heading towards a 15-minute block rather than a one-hour block, all generators and beneficiaries must declare a schedule of generation every 15 minutes, a day in advance, in order to benefit from cheaper rates, and not the spot rat," explained an official.

Exchanges have also been urged to form separate clearing houses for transactions.

"While it is desirable to have the clearing house separate from the trading exchange, there is no time limit for the exchanges to act upon it.

Though it has been aptly provided in the power regulation guidelines of the commission, there is no deadline. We do not have a proposal right now.

The proposal should come from the exchanges, since exchanges have evolved over time and volumes have also gone up now," according to an official.

To improve the design of the exchanges, the CERC had also suggested circuit breakers or filters in trades to curb volatility. Lately, however, it has been seen that a few states prefer not to buy power and, instead, resort to load shedding, which results in an artificially subdued demand for electricity.

"Thus, since the demand is low, prices have been going down. Under these circumstances, there is no point in having a circuit breaker when the market does not see much volatility.

These problems should be tackled first, and only then should we adopt a circuit filter or restrictions on the movement of prices in power trading," sources said.