The Hindu Business Line : Power Exchanges caught in CERC, FMC cross currents

New Delhi, Nov. 7 The turf war between the Forward Markets Commission (FMC) and the Central Electricity Regulatory Commission (CERC) over regulatory jurisdiction has put the Power Exchanges in a spot.

With commodity market regulator FMC issuing notices threatening “criminal prosecution” against power exchanges for offering month-ahead contracts, the exchanges have now turned to the CERC for direction. The new week-ahead and month-ahead contracts, launched by the Exchanges along with the day-ahead contracts, were offered only after vetting and clearances by the CERC earlier this year.

Illegal trading

The FMC, in its notice, has said trading in electricity futures on the NSE-NCDEX promoted Power Exchange Ltd (PXIL) would be considered illegal since the Exchange is not registered with it. Also, it has alleged that any trading in “non-transferable specific delivery (NTSD) contracts” beyond 11 days on the PXIL platform is not legal.

It has warned that power trading firms entering into such contracts “are liable for criminal prosecution under the Forward Contracts (Regulations) Act, 1952. They are hereby advised to cease and desist from trading such contracts on PXIL.”

When contacted, a functionary with the Exchange said: “This is a sensitive sector and the issue of regulatory overlap is a cause of concern for us and other players in the sector. We need clarity on the issue and have asked CERC to intervene in the matter since the contracts were cleared by the power regulator in the first place.”

CERC stance

The CERC is sticking to its position, as laid out in an order in April this year, that the mandate to promote development of the power market is vested with it under Section 66 of the Electricity Act 2003.

In its April order, the power regulator had said that MCX and other commodity exchanges that permitted trading of forward contracts by FMC on their platform will be governed by the orders, guidelines, regulations and other prescriptions of the CERC since they are “not inconsistent” with the provisions of the Forward Markets Contracts (Regulation) Act, 1952.

The CERC also noted that FMC exercises jurisdiction over the forward contracts in accordance with the provisions of the FMCR Act as they cannot be said to be inconsistent with those of the Electricity Act, 2003 and the two statutes operate in independent fields.

“Regulatory oversight to promote development of market in power is vested with the CERC as mandated under Section 66 of the Electricity Act 2003 and therefore, the orders and guidelines issued by the Commission and the regulations framed shall be binding on all concerned,” the Central commission said.

More Stories on : Regulatory Bodies & Rulings | Commodity Exchanges | Power

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