Central Electricity Regulatory Commission (CERC) on Wednesday directed its officials to hold a comprehensive review of operations at power exchanges to ascertain whether they comply with the CERC (Power Market) Regulations, 2021.

The exercise is being held after the regulator said that on preliminary scrutiny of the quarterly Market Surveillance Committee (MSC) reports, it observed a few instances of manual entry of bids, cancellation of bids after the market hours, entry of bids after the market hours, and extension of market hours, etc.

“The Commission is of the considered view that a comprehensive review of the operation of power exchanges is necessary in order to ascertain that the affairs of power exchanges are carried out in compliance with provisions of the PMR 2021,” the order said.

Comprehensive review

Therefore, the Commission directed its staff to arrange to conduct an audit of the processes as well as software of the three power exchanges in terms of the relevant provisions of PMR 2021. For this purpose, suitable agency(ies) may be appointed, it added.

Power exchanges—Indian Energy Exchange (IEX), Power Exchange India (PXIL) and Hindustan Power Exchange (HPX)--account for around 7-8 per cent of the total electricity trading in the country.

“The audit should be completed within a period of six months from the date of this Order. The audit agency(ies) shall submit their report within three weeks of completion of the audit. Based on the findings in the audit report, the Commission may issue further directions as deemed necessary,” the order said.

IEX Executive Director (Business Development, Strategy and Regulatory Affairs) Rohit Bajaj said “Over the years, CERC has worked towards bringing transparency and building strong frameworks for the exchanges and this order of the CERC issued today is another step in that direction, which will bring more transparency, further strengthen regulatory practices and lead to continuous improvement in the functioning of the exchanges.”

Checking market manipulation

The regulator agreed that it is necessary to have some flexibility on part of the power exchanges to deal with system exigencies and to accommodate the requests of members.

However, it emphasised that the procedure for bid entry and timelines, which constitute key elements of a double-sided closed auction process with uniform price discovery, should be strictly complied with to avoid any scope for market manipulation.

“There shall be no manual entry of bids by the power exchanges on behalf of their members within or after the trading hours,” CERC said in its order.

No bids shall be accepted by power exchanges after the trading hours for any reason whatsoever, the Commission added.

Exchanges shall, within one month from this order, build a robust system with end-to-end encryption of data from the trading workstation of the respective member/clients and trading platform of the exchange to ensure that the entire trail of bidding session starting from bid submission till the end of bidding session is encrypted.

“No extension shall be allowed in the trading hours, except in case of any constraint identified by the system operator,” it added.