CERC-Sebi decision: Longer time period energy derivatives allowed

A ten-year-old regulatory jurisdiction situation relating to energy markets has now been totally clarified and resolved, paving the way in which for introduction of assorted delivery-based contracts with longer period on energy exchanges.
The long-pending dispute between the Securities and Exchange Board of India (Sebi) and the Central Electricity Regulatory Commission (CERC) has lastly been resolved with the Supreme Court favourably disposing of the matter as per the phrases of the settlement reached upon by the 2 events.
Sebi and CERC have come to an settlement that the latter will regulate all of the bodily delivery-based ahead contracts whereas the monetary derivatives might be regulated by the market regulator.
According to the Power Ministry, the decision has opened the gate for introduction of longer period delivery-based contracts within the energy exchanges which has been at present restricted to solely 11 days as a result of pendency of the case. “This will enable the discoms and other large consumers to plan their short-term power procurement more efficiently,” the Ministry mentioned in an announcement.
Similarly, the commodity exchanges, together with MCX, can now introduce monetary merchandise like electrical energy futures which is able to allow the discoms and different massive customers to successfully hedge their dangers of energy procurement. “… This will bring newer products in the power/commodity exchanges and attract increased participation from genco, discoms, large consumers etc, which will eventually deepen the power market,” it mentioned.

All Ready Delivery Contracts and Non-Transferable Specific Delivery (NTSD) entered into by members of the facility exchanges might be regulated by CERC. The contracts are settled solely by bodily supply with out netting and the rights and liabilities of events to the contracts will not be transferable. Commodity derivatives in electrical energy apart from Non Transferable Specific Delivery (NTSD) contracts as outlined in SCRA will fall below the regulatory purview of the Sebi.
“… Distribution companies and other large consumers would be able to utilise such contracts to better plan their portfolio requirements in a more efficient and transparent manner. Such contracts effected through the power exchange would ensure payment timeliness and guarantees,” mentioned Prabhajit Kumar Sarkar, MD & CEO, Power Exchange India Limited.