Rules of Transaction

CERC issues draft OTC platform guidelines

The Central Electricity Regulatory Com­mission (CERC) recently issued draft registration and application gui­­delines for establishing and operating over-the-counter (OTC) platforms, in line with the CERC (Power Market) Regula­ti­ons, 2021. The OTC platforms will allow buyers and sellers to directly undertake electricity transactions, at mutually ag­reed prices and terms of the contract. The guidelines outline the objective and eligibility criteria, as well as the procedure for filing the application and grant of registration for OTC platforms.

Key features of the draft guidelines

The objectives of the OTC platform, as stipulated in the Power Market Regula­tion, 2021, are to provide an electronic platform with the information of pot­en­tial buyers and sellers of electricity. It will be responsible for maintaining a re­pository of data related to buyers and sellers, and providing historical data to them. The OTC operator will also be responsible for providing analytics services, historical trade analysis, or other information to all participants on a fair and non-discriminatory basis. The registration of an OTC platform will continue to be in effect for a period of five years unless revoked or cancelled earlier. However, the CERC may renew registration, on an application filed by the OTC platform operator, for a further period of five years at a time. The registration granted to an entity to operate an OTC platform will not be transferrable.

The OTC operator should have an objective in place as well as fair and transparent criteria for participation on the platform. It should undertake due diligence at the time of onboarding of participants and maintain all relevant information ab­out them. The operator will also be res­ponsible for addressing and resolving any dispute arising between the participants. It will also implement systems and controls to ensure the fairness and integrity of participants, monitor their activities in real time and post facto, and disclose conflict of interest arising from the participation of related parties or group agencies to the CERC. Apart from this, the operator will address and resol­ve any dispute that may arise or is likely to arise between its members. The application for the grant of registration to establish and operate an OTC platform will have to be filed online through the e-filing portal of the CERC. The guidelines require the ap­plicant to publish the application along with de­tails of the proposed OTC platform on its website for public objections and suggestions. The applicant will submit be­fore the CERC its reply on the ob­jections and suggestions received.

As per the eligibility criteria for the registration of the OTC platform, the applicant should be a company incorporated in India under the Companies Act, 2013, and shareholding by non-residents, if any, must conform to all applicable laws and regulations. The applicant company should have key managerial personnel with experience of at least five years in operating or developing technology services or products, preferably for the po­wer sector. The guidelines state that po­w­er exchanges, trading licensees, and grid-connected entities (such as generating co­m­panies, distribution licensees, open ac­c­ess consumers or any person acting on their behalf) or any of their associates will not be eligible for the registration of OTC.

On the technological front, the guidelines require the applicant to own and maintain robust technology infrastructure with a high degree of reliability, availability, scalability and security in respect of its systems, data and network. Further, the technological infrastructure of the applicant should be capable of disseminating transaction information on a real-time or near-real-time basis. As per the financial eligibility criteria, the minimum net worth of the applicant should be Rs 10 million. Further, the company or any of its associates, partners, promoters, or directors should not have been declared insolvent. Apart from this, the OTC operator must maintain all data relating to the activities on the platform in an easily retrievable medium  for at least 10 years. The data sought for any investigation by the CERC or any other authority as required under the laws or regulations will be maintained for three years from the date of completion of the investigation.

Net, net, the OTC platform will facilitate direct interaction between buyers and sellers in the market, as compared to the existing mechanism wherein electricity transactions are through power ex­changes and trading licensees. This will not only allow renewable energy developers and conventional gencos to efficiently utilise their surplus capacity, but also allow bulk electricity consumers to manage their cost of energy.

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