The Central Electricity Regulatory Commission conducted a public hearing to gather comments on the Draft (Power Market) Regulations, 2020. Prayas’s comments and suggestions focussed on the following issues and opportunities:

• Need to re-examine the proposal for market coupling (having common price clearing and uniform prices for multiple power exchanges). The Commission was urged to defer introduction of coupling to encourage competition, innovation among exchanges and assess impact of futures, new exchanges, new contracts and bid orders which add uncertainty to market development.
• Ensure performance scrutiny of exchanges by retaining provisions to ensure new exchanges capture a minimum (albeit relaxed from 20% to 15%) market share in order to continue operations.
• Regulatory approval for new contracts as well as bid orders needed along with audits of clearing algorithm 6 months before and after introduction of new product .
• Clarification on regulatory treatment of green products such as green bid orders, REC settlement with DAM and continuous trades with green markers.
• Over the counter (OTC) platforms for bilateral transactions to have Rs. 5 crore net worth rather than Rs. 50 lakhs to discourage non-serious players. Such platforms to have grievance redressal mechanisms for platform functioning and options for flagging repeated defaults based on member data submissions. Clarity of whether DEEP platform needs to register as an OTC platform is also needed.
• Several public accountability measures such as having specific penalties for market manipulation, public availability of statutory data submissions and public consultation for crucial processes necessary.
• Futures in electricity pose significant risk for a mostly cost-plus sector. Irrespective of dangers, if introduced should happen transparently in markets with sufficient liquidity, after exercising adequate caution and on the basis of strong cooperation and information sharing between regulators.

Please find below, the Prayas’s detailed submission and the presentation made at the public hearing as well as CERC’s draft regulations and the explanatory memorandum.