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CERC guidelines say Discoms, Gencos and power exchanges cannot operate OTC platforms

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Electricity regulator released norms for Registration and Filing Application for Establishing and Operating Over the Counter (OTC) Platform, 2022

The Central Electricity Regulatory Commission (CERC) has said that entities such as power trading exchanges, Discoms, Gencos and power trading licensees are not allowed to operate an OTC platform.

This is part of the guidelines released by the regulator on Wednesday for Registration and Filing Application for Establishing and Operating Over the Counter (OTC) Platform, 2022.

“We have noted the stakeholders’ submissions and are of the view that the eligibility conditions and the Negative List have been provided as per the provisions of the PMR 2021, and are adequate. The suggestion of allowing traders’ participation in OTC Platform is beyond the scope of the present regulatory dispensation,” the CERC said.

OTC platform is an electronic mechanism for exchange of information among electricity buyers and sellers. The operator is an entity registered to establish and operate the platform under the Power Market Regulations (PMR) 2021.

The platform also holds information about potential electricity buyers and sellers and maintains a repository of data related to buyers and sellers including historical data that serve as advanced analysis tools to market participants.

In February 2021, CERC notified the Central Electricity Regulatory Commission (Power Market) Regulations, 2021, which came into effect on August 15, 2021. PMR 2021 allows CERC to notify guidelines for registration and filing applications for establishing and operating OTC Platforms.

Negative List

Under the general criteria requirements for setting up an OTC platform, the CERC proposed a Negative List, which consists of entities that are not eligible to file applications for establishing and operating the platform.

Negative List includes power exchanges or their associates; trading licensees or their associates; and grid connected entities like Gencos, Discoms, open access consumers or any person acting on their behalf, or any of their associates.

In its submission, IIT Kanpur suggested that all transmission licensees, being grid-connected entities, should be included in the list. On the other hand, Indian Energy Exchange’s (IEX) recommended that since Facilitator Members of Power Exchanges act on behalf of grid connected entities, they should also be included in the Negative List to avoid any potential conflict.

‘list is restrictive’

Tata Power said that traders should be allowed to operate OTC Platforms or have a share in equity. “The negative list is beyond comprehension, rather it should be more inclusive as it will be difficult to check market participants in case they are carrying out activities listed in the scope of OTC Operator without registering as OTC Platform,” it added.

State-run PTC said that disallowing Trading Licensees to take any kind of equity in an OTC Platform or operate their own Platform is akin to restricting the natural digitisation of a trading licensee’s business.

“This does not allow a level playing field for all the market participants. It is, therefore, submitted that power traders may be allowed to (1) take preferential equity in an OTC Platform. (2) provide infrastructural support to an OTC Platform and/ or (3) operate an OTC Platform,” it added.

‘Shadow entities’

Kreate Energy suggested that traders may be allowed to extend a maximum of 5 per cent equity of OTC Platform, while RE connect submitted that some of the power trading companies are operating with shadow entities in different names and a large number of them would not even have meaningful business activities ongoing. It is important to restrain such entities from owning or operating an OTC Platform through such shadow entities.

Published on May 13, 2022

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