CERC Approves Methodology for Price Discovery on Hindustan Power Exchange

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The Central Electricity Regulatory Commission (CERC) recently directed the Hindustan Power Exchange to use the ‘Uniform Price Step Auction’ as a matching methodology for price discovery in daily and weekly contracts.

It also directed the exchange to use open auction for ‘Uniform Price Step Auction’ so that the participants, while bidding for these contracts, can make informed decisions after seeing buy and sale bids offered by other anonymous participants.

It asked the power exchange to make daily and weekly contracts available only for pre-specified time blocks notified to the market participants in advance with the help of circulars.

Hindustan Power Exchange had filed a petition to approve the technology to be used on its platform under CERC Power Market Regulations, 2021.


Background

On September 7, 2018, the petitioner sought permission to register itself and operate as a power exchange. The Commission accorded approval.

The power exchange noted that the transaction platform had been developed by reputed technology vendors in India and abroad. The transaction platform has a module-based flexible architecture for efficient operations, reliable order flow, and integration of price discovery with clearing and settlement.

Hindustan Power Exchange noted that the transaction platform provided the capability to monitor the trading margin utilization of members and participants with a continuous check on their exposure limits and availability of funds.

The power exchange clarified that it had got its transaction platform audited by Deloitte, focusing on the price discovery algorithms and process of creating member and client code. The petitioner submitted that it would be in a position to commence operation within a day from the Commission’s approval.

The Commission observed that the power exchange provided details on the transaction platform and its technical aspects, including details on the front end, server, database, and operating systems to be used for various contracts.

It approved the proposed transaction platform and its technical aspects as submitted by the exchange. The central regulator also directed the power exchange to submit a detailed report within one month after completion of six months of its operations regarding operational experience and compliance with the requirements specified in the Power Market Regulations, 2021.

CERC, to create a level playing field amongst the power exchanges, directed the petitioner to use the ‘Uniform Price Step Auction’ as a matching methodology for price discovery in daily and weekly contracts.

The Commission directed the power exchange to make appropriate software changes and align its business rules, rules, and by-laws before the commencement of operations on its platform.

Recently, CERC approved Power Exchange India’s proposal to introduce delivery-based monthly contracts, which can be traded on one month, two-month, and three-month-ahead basis in conventional and renewable energy segments of the term-ahead market.

Earlier, CERC directed the power exchanges to re-design their bidding software so that members can submit their buy bids at the maximum price of ₹12 (~$0.16)/kWh for Day-Ahead Market and Real-Time Market.

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