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SC settles 10-year long CERC, SEBI dispute; paves way for power derivatives, futures – Economic Times

Electricity will now be traded as other commodities with forward contracts and derivatives on exchanges with Supreme Court disposing of a decade-long jurisdictional spat between power regulator Central Electricity Regulatory Commission (CERC) and the Securities & Exchange Board of India (Sebi) after they reached a mutual agreement.

The union power ministry in a statement issued on Thursday said the significant development “has the potential to change the landscape of the power market in the country.”

This will deepen the power market to volume of 25% by 2024-25 from the present level of 5.5% of the volume, the statement said.

This will bring newer products in the power/commodity exchanges and attract increased participation from generation companies, distribution companies, large consumers, which will eventually deepen the power market, it said.

Both SEBI and CERC have come to an agreement that CERC will regulate all the physical delivery based forward contracts whereas the financial derivatives will be regulated by SEBI.

The settlement of the spat has opened the gate for introduction of longer duration delivery-based contracts in the power exchanges which has been currently restricted to 11 days due to the pendency of the case.

“This will enable the discoms and other large consumers to plan their short-term power procurement more efficiently. Similarly, the commodity exchanges viz. MCX can now introduce financial products viz. Electricity futures which will enable the discoms and other large consumers to effectively hedge their risks of power procurement,” the statement added.

The statement said all ready delivery contracts and Non-Transferable Specific Delivery (NTSD) contracts as defined in the Securities Contracts (Regulation) Act, 1956 (SCRA) in electricity, entered into by members of the power exchanges, registered under CERC (Power Market) Regulations, 2010, shall be regulated by CERC.

As per the CERC regulations, the contracts have to be settled only by physical delivery without netting.