Central Electricity Regulatory Commission proposes evening market on power exchanges to create liquid, efficient and competitive markets

The Central Electricity Regulatory Commission (CERC) wants to introduce an evening market for power exchanges to create liquid, efficient and competitive markets.CERC in its discussion paper has observed that an evening market (between 4 pm and 5 pm) will help utilities balance out their demand-supply portfolios for the next day.At present, Indian Energy Exchange (IEX) and Power Exchange of India (PXI) are engaged in day-ahead transactions. Auctions in these two exchanges take place between 10 am and noon in the day-ahead segment.

The discussion paper was a result of uncleared transactions raised recently by power exchanges. This ancillary power market would handle real time active power imbalances in the grid and will utilise the uncleared bidded-out power offered during trading hours.

CERC Chairman Pramod Deo told Business Standard: “The evening market will have a double sided closed bid auction with collective scheduling of all transactions. All rules, procedures, price discovery mechanism could remain exactly the same as the morning day-ahead market. It can be viewed as another iteration of the morning market conducted in the evening hours.”

He said this would help distribution companies (DISCOMS) to take a more informed decision in the market, especially with respect to weather related information and hence the expected load pattern for the following day. It would thus facilitate demand-supply balancing of their portfolios for the following day.

According to CERC, the introduction of the evening market will provide more choice to consumers and will lead to higher consumer satisfaction as it provides participants a second chance to bid.

However, the CERC said that the system would lead to two benchmark reference prices — the morning market price and the evening market price – and this might confuse market participants.

Since the evening market would provide another opportunity to bid for market participants, it may not lead to serious bidding in the morning session.

IEX sources said: “The introduction of the evening market as proposed in the CERC discussion paper will not add more than 5-10 per cent of the present volume on power exchanges. Associated cost may not commensurate with benefits that may accrue, if at all. Besides, the evening market may add to confusion because of two prices for the same hours and consequent audit querries.”

On the other hand, PXI sources observed that it may deepen the market and benefit the short-term electricity market.

A Mumbai-based analyst, who did not want to be named, said, “ There are apprehensions that the same buyers and sellers may try to take advantage. Some of the distribution companies or sellers may buy in the morning hours, where prices are expected to be on the lower side, while they might sell during the evening peak hours at a higher price.”

Besides, he said that more attention was needed to have a consolidation of successful market segments and efforts should be made for streamlining procedures.