CERC allows power exchanges to charge 2 paise per unit transaction fee, ET EnergyWorld

New Delhi: The Central Electricity Regulatory Commission (CERC) has allowed the three power exchanges in the country to charge a transaction fee up to the ceiling of 2 paise/kWh on either side of the transactions.

Indian Energy Exchange (IEX), Power Exchange India Ltd (PXIL) and Hindustan Power Exchange (HPX) had petitioned the regulator to approve the ceiling. The three trading platforms have been charging a transaction fee of 2 paise/kWh from both buyers and sellers for over ten years.

The transaction fees charged has enabled the Power Exchanges to carry out their operations, bring improvement in product and service offerings, strive towards market development, comply with regulatory requirements, etc. which have increased participation and enhanced competition and efficiency in the market.

In its petition, IEX argued that during the last five years, it has, on an average, generated an economic surplus of Rs 20,000 crore per year benefiting both buyers and sellers and has provided an overall cost savings of Rs 32,268 crore to the buyers which, on a per unit basis, translates to around 74 paise/unit, much higher than the transaction fees charged by the exchanges.

IEX had argued that a transaction fee of 7 paise — 3.5 paise/kWh from either party to the transaction — should be appropriate for the exchange in line with the Trading Margin Regulations but as it has already been specified in PMR 2021, the commission may approve transaction fees of up to 2 paise/kWh.

“A transaction fee with a cap of 2 paise/kWh from either party to the transactions will provide adequate headroom to the Power Exchanges to meet their business risk and will incentivize them to innovate and compete amongst themselves eventually benefiting the market participants and the end-users,” IEX had said.

IEX had also alternately proposed to charge transaction fees based on the duration of the contract, that is, up to 2 paise/kWh, 1.75 paise/kWh, and 1.5 paise/kWh on either side of the transactions for the contracts with duration of 0 to 1 month, 1 to 6 months, and beyond 6 months, respectively.

CERC said in its order that even after 14 years since the two Power Exchanges (IEX and PXIL) started their operations, one Power Exchange has the predominant market share, and the new Exchange HPX is still in the process of introducing new contracts and stabilizing operations.

“At this stage, any change in the transaction fee might hurt competition rather than promoting it. The smaller Exchanges may find it difficult to sustain with the reduction in transaction fees, which will negatively affect competition in the market,” the order said.

It added that at the same time, it may not be prudent to keep a differential transaction fee on the basis of volume traded as this may distort participation across the exchanges and may also provide perverse incentives to the exchanges.

  • Published On Apr 6, 2023 at 04:58 PM IST

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