Electricty forward contracts: SC admits CERC's plea against Forward Market Commission

The Supreme Court has admitted the plea of the electricity regulator, Central Electricity Regulatory Commission , pertaining to its disputes with the commodity regulator, Forward Market Commission, over regulation of electricity forward contracts and power futures. 

A bench comprising Justice GS Singhvi and Justice AK Ganguly on Wednesday issued notice to the FMC on the plea of CERC seeking direction to restrain the commodity regulator and Multi Commodity Exchange from launching and operating financial instruments, such as electricity forwards, power futures and derivatives contracts. 

Solicitor General Gopal Subramanium on behalf of CERC picked holes in the order of the Bombay high court which had said that it has no exclusive jurisdiction over regulation of power futures. 

Additional Solicitor General Mohan Parasaran appearing for the FMC, however, told the court that under the provision of the Forward Contracts (Regulation) Act, 1952, it has jurisdiction over such issue. At this, the court said, "the matter is important which requires detailed hearing. We grant the leave (admit the petition)". 

"The high court committed a grave error in ignoring the fact that the 1952 Act does not give any power or functions to the Forward Market Commission on regulating prices of electricity and regulating prices of electricity and regulation contracts which have a direct impact on prices of electricity", said CERC in is Special Leave Petition. 

It said, "the Forward Market Commission has no statutory powers, functions, expertise or domain knowledge on price discovery, impact of financial instruments on electricity prices as well as the mechanism of deciphering the impact on demand-supply of electricity on account of financial instruments such as electricity derivatives, electricity forwards and electricity futures". 

"The petitioner commission will have an interest in ensuring that transactions on the exchanges are conducted in a free and fair manner so that consumers are not subjected to potentially anti-competitive behaviour. Therefore, the commodity exchanges dealing with transferable or non-transferable contracts in electricity shall be subject to the prescriptions and regulations of the petitioner commission", said CERC in its petition.