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India could get its third power exchange next fiscal. A joint venture, National Power Exchange Ltd (NPEX) hopes to get the final nod from the Central Electricity Regulatory Commission (CERC) soon, paving the way for it to become operational.
Officials privy to the developments say the time taken (three years since its inception) to reach this stage has been mainly because NPEX has been treading cautiously, learning from the experience of the existing two exchanges.
India has two power exchanges – Indian Energy Exchange (IEX) and Power Exchange India Ltd (PXIL). NPEX is a joint venture promoted by NTPC, NHPC, Power Finance Corporation and Tata Consultancy Services to undertake the business of setting up and operate a national level power exchange. The other equity partners of NPEX are Bombay Stock Exchange, IFCI, Meenakshi Power and DPSC.
Asked whether India had the capacity to handle more than one power exchange, an official said, according to CERC market regulation, technically five exchanges can co-exist. Besides, the CERC regulations stipulate that if any exchange is unable to garner 20 per cent of market share within two years of its operations, then either it closes down or can be merged with the more successful one, provided three exchanges are in operation.
The project involves an investment of about Rs 50 crore. NPEX, when operational, will have to compete with the two existing players. Today, power purchase from exchanges account for about less than 2 per cent of total consumption.
During 2010-11, 13.54 billion units (BU) were traded through the existing exchanges – IEX and PXIL. The trading price range was between Rs 2.04/unit and Rs 7.75/unit.
Trading of power is recognised as a distinct licence activity.
The Central and State Electricity Regulatory Commissions have powers to grant inter-state and intra-state trading licenses. According to CERC, there are 40 inter-State trading licensees on March 31, 2011. Current participants in power trading business include PTC, NVVN, Tata Power Trading Company, and GMR Energy among others.
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