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Now, SC to decide on power futures trading regulation

The dispute over regulation of power futures between the electricity regulator and the commodity futures watchdog has reached the Supreme Court, which on Wednesday issued notice to the Forward Markets Commission and Multi-Commodity Exchange of India.

The dispute over regulation of power futures between the electricity regulator and the commodity futures watchdog has reached the Supreme Court, which on Wednesday issued notice to the Forward Markets Commission (FMC) and Multi-Commodity Exchange of India (MCX).

The notice was issued on a special leave petition filed by Power Exchange of India in which the Central Electricity Regulatory Commission (CERC) has also joined.

At stake is whether the Supreme Court should stay a Bombay High Court order that gave neither the FMC nor the CERC ?exclusive jurisdiction? over power futures but instead asked the government to clarify on the subject.

Both Power Exchange of India (PXIL) and CERC have challenged the high court?s decision. The row began after PXIL, in early 2009, drew CERC?s attention to MCX?s launch of electricity futures based solely on an approval by FMC, which it termed as ?incorrect.?

PXIL said that electricity futures are within the domain of the electricity regulator only.

The CERC agreed and issued an order in January last year making it clear that its rules will govern all electricity related contracts, including derivatives. MCX had to discontinue trading in derivatives and will need to move the CERC afresh for licence.

Incidentally PXIL, a spot exchange that offers ?day? and ?week ahead? trading in power is promoted by NSE and commodity futures exchange NCDEX. While its rival MCX is attempting to enter equity trading where NSE is the dominant player, the two entities have also fought a bitter dispute in the competition commission recently over pricing of products in the currency derivatives market.

In the electricity market dispute, MCX moved the high court once the CERC orders came out.

The joint petition from PXIL and CERC contends that the high court has not taken into consideration the fact that the power regulator has been granted exclusive rights by the government on any kind of electricity trade through the Electricity Act, 2003.

?The high court has failed to appreciate that due to extremely complex and vital nature of the electricity sector, it is imperative that all regulatory aspects pertaining to the sector are dealt with exclusively by a single regulator that has an in-depth understanding of the complexity and dynamics of the electricity sector as well as the legal and regulatory framework,? it stated.

Supporting CERC, PXIL also stated that ?due to the extremely complex and vital nature of the electricity sector, it is imperative that all regulatory aspects pertaining to sector are dealt with exclusively by a single regulator that has an indepth understanding of the complexity and dynamics of the electricity sector as well as the legal and regulatory framework for governing the sector.?

It further added that future/forward contract is meant for delivery of goods (electricity) and hence it is inconceivable that Forward Market (Regulation) Act, 1952 would govern the physical delivery of electricity in a power exchange so far as the sale and purchase of electricity is concerned.

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First published on: 07-07-2011 at 02:04 IST
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