At loggerheads

The CERC's latest missive was sparked off by the FMC issuing notices to power exchanges threatening “criminal prosecution” for offering month-ahead contracts late last year.

Anil Sasi

New Delhi, Feb. 19

In the continuing fracas between two key regulators, the Central Electricity Regulatory Commission (CERC) has petitioned the Union Government to exempt Power Exchanges dealing in electricity contracts from the purview of the Forward Contracts (Regulation) Act, 1952.

The imbroglio, focussed mainly on the issue of regulatory jurisdiction on power exchanges offering month-ahead contracts, has emerged as a bone of contention between CERC and the commodities market watchdog Forward Markets Commission (FMC).

As a further measure, CERC has, in the letter, asked the Centre to ensure that electricity contracts, where there is an option of financial settlement, are not traded in commodity exchanges being regulated by the FMC.

The CERC Chairman, Dr Pramod Deo's latest missive to the Power Secretary, Mr H.S. Brahma, on Friday asks the Centre to “invoke its powers under Section 27 of the FCRA to exempt power exchanges dealing in non-transferable specific delivery electricity contracts from all provisions of FCRA.”

The CERC's latest missive comes in the wake of a worsening turf-war between the two regulators, which was sparked-off by the FMC issuing notices to power exchanges threatening “criminal prosecution” for offering month-ahead contracts late last year. The new week-ahead and month-ahead contracts, launched by the exchanges along with the day-ahead contracts, had been offered by the exchanges only after vetting and clearances by the CERC.

The FMC claimed that trading in electricity futures on the NSE-NCDEX promoted Power Exchange Ltd (PXIL) would be considered illegal since the exchange was 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. The CERC had, meanwhile, claimed that the mandate to promote development of the power market is vested with it under Section 66 of the Electricity Act, 2003.

The CERC added that FMC exercises jurisdiction over the forward contracts in accordance with the provisions of the FCRA as they cannot be said to be inconsistent with those of the Electricity Act, 2003 and the two statutes operate in independent fields. The battle between the two regulators had reached the Bombay High Court, with the FMC dragging the CERC to court.

The CERC Chairman's latest letter comes despite an assertion by the Power Ministry earlier this month that the issue had been resolved and that futures trading in electricity would be regulated by the Central Electricity Regulatory Authority (CERC), a view contested by the commodities market regulator FMC. The Power Secretary, Mr H.S. Brahma, had said earlier this week that the matter had been resolved and that after a series of meetings, FMC had conceded turf to the CERC on the issue of regulation these contracts.

(This article was published in the Business Line print edition dated February 20, 2010)
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