NEW DELHI: The Central Electricity Regulatory Commission (CERC) on Thursday released a consultation paper to develop a Power Exchange (PX) for electricity trading.

A common platform for trading would help streamline power trading, standardise electricity as a tradable product, provide a payment security mechanism to buyers and sellers and increase business confidence in the power sector, the CERC said in a release. The Staff Paper on Power Exchange addresses a wide range of issues related to development of an electricity market in India.

Similar to stock and commodity bourses, a power exchange will act as a platform for buying, selling and trading of electricity. At present there is no such exchange in India and electricity is traded bilaterally at mutually agreed rates.

However, the U.S., Norway and Sweden have already set up power exchanges, the release said. The CERC said such an exchange would be run by an independent board with five directors including a chairperson, under regulatory oversight. Participation in the PX might be voluntary for the present, it said.

The exchange should be designed for dispensing short-term power available for trading through competitive bidding by inviting simultaneous anonymous bids from buyers and sellers on day-ahead hourly basis.

The commission has sought comments and suggestions from all stakeholders by August 31, after which it will hold open consultations on the subject.

The PX should adopt a marginal pricing principle. It is proposed that the PX may essentially follow the classic market splitting model. However, in a congested zone, the buyers can be served at the weighted average cost of supply and the PX may not collect any congestion revenue. Uniform pricing philosophy based on marginal cost of supply may be followed for suppliers.

In order to ensure that suppliers quote close to their true marginal costs, bid caps could be considered, the CERC said in the paper. — PTI

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