The Central Electricity Regulatory Commission (CERC) has approved the application of Pranurja Solutions Ltd, a company promoted by BSE, PTC Ltd and ICICI Bank, to set up a power exchange, which will be the country’s third after IEX and PXIL.

However, this comes with a condition that the promoters reduce their shareholding to not more than 25 per cent each, within eight weeks. The order was pronounced on July 31. But this is seen as a technical issue, because the promoters have undertaken to reduce their shareholdings to not more than 25 per cent each, in accordance with Regulation 19 of the Power Market Regulations, 2010.

At present, PTC holds 49 per cent in Pranurja Solutions, a major niggle with the existing two exchanges, as PTC is itself a major trader in the power market. A trader owning nearly a big chunk of the exchange would be a major conflict of interest because it could trade only on the exchange it owns.

BSE and ICICI Bank own 41 per cent and 9.9 per cent, respectively, of Pranurja Solutions.

The promoters of Pranurja Solutions have undertaken that they would dilute their holdings to 25 per cent or less, by getting other companies to join in as shareholders. The proposed shareholding pattern is as follows: PTC India Limited (25 per cent), BSE Investments Limited (25 per cent), ICICI Bank (9.9 per cent), Greenko Energies (5 per cent), Kirti Telnet (5 per cent), Subrashi Vinimay (5 per cent), Jindal Power (2 per cent), Chamaria (3.1 per cent), Tollman International (5 per cent), Varanium Capital (5 per cent), Lord Dholakia (5 ), Meenakshi Power (5 per cent).

“The Commission is prima facie satisfied that the Petitioner Pranurja Solutions Limited meets the requirements of the Power Market Regulations 2010 for grant of registration, subject to fulfilment of the shareholding pattern under Regulation 19 of the Power Market Regulations 2010,” the CERC order says, directing the promoters of Pranurja Solutions to reduce their stakes as they had committed to, within eight weeks.

Dominant share

The power exchange is entering the arena at a time when one of the two existing exchanges, IEX, has a dominant share of 95 per cent of the market. To the other exchange, PXIL, it has become a sort of a Catch-22 situation — more trades will not happen on the exchange until there is depth; but depth cannot come until more and more traders transact on the exchange.

However, this situation is expected to change very soon when the government would bring in the proposed reforms in the power markets, a key feature of which is ‘market coupling’.

‘Market coupling’ means that all the buy and sell bids would be matched by a ‘market coupling operator’ so as to arrive at a uniform market clearing price. The CERC defines ‘market coupling’ as “the process whereby collected bids from all the Power Exchanges are matched, after taking into account all bid types, to discover the uniform market clearing price.”

When this happens, it wouldn’t matter through which exchange you trade. To take a hypothetical analogy, this is something like SEBI setting up a body which would match all the sell and buy bids for a share, says TCS, and arriving at one uniform price for everybody — it may not work for securities, but the government wants to bring it in for electricity trading, with a view to bringing down the market price of power.

Market coupling comes alongside another power market reform, called ‘market-based economic dispatch (MBED) of electricity’. Under MBED, all buyers and producers of electricity must buy and sell power only through exchanges, even if they have bilateral power purchase agreements (PPAs). The generators will be paid the fixed charges as per the agreement, but they will have to compete in the market on their variable cost — the cheapest generators get to sell first, a big boon for the renewable energy producers.

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