New Age Markets in Electricity (NAME) established India’s 1st Over The Counter (OTC) Platform under CERC Power Market Regulations that operates as an Open, Transparent and Competitive marketplace, fostering direct interaction between members and reducing the current level of information asymmetry in the OTC market. In a recent interview with Power Line, Kapil Dev, Managing Director, NAME, discussed the current state of the OTC Market, the key initiatives taken by the OTC platform and the future course for the market. Edited excerpts…
How is the OTC market transitioning from a fragmented ecosystem to a structured, technology-enabled marketplace?
Trading predates Electricity Act of 2003. While bilateral trading grew significantly in the initial years leading to launch of a spot market through power exchanges, it took a back seat thereafter. It became largely disorganized, misarranged, could not keep pace with advancement in technology, did not cater to the need of the buyers and sellers to engage in a transparent manner and was fettered with mistrust, delays, disputes and defaults.
NAME offered 1st OTC Platform for power markets and with the launch of this platform, the OTC market has started its journey towards being better organised with integrated information flow, physical flow and financial flow of every deal. A screen-based facility is sine qua non for transparency in any marketplace. An electronic marketplace/platform enhances pricing efficiency, streamlines processes, reduces processing time and centralises consumer interest.
The OTC market, facilitated through the OTC platform, is a quote-driven market. The hallmark of this marketplace/venue (a neutral and regulated screen-based facility in do-it-yourself mode) is its ability to cater to the customised requirements of its members and run through standard protocols that lead to user-defined processes. Thus, this open, transparent and competitive platform is providing access to an alternative marketplace. Members are provided with features and functionalities for broadcasting their requirements, followed by responses, which lead to acceptance and then allocation. Members’ adherence to the terms and conditions of the agreement ensures accountability.
The platform is the only regulated marketplace that offers sellers the ability to list their requirements to sell. This is a significant development for the power markets, in general, and market for renewable energy, in particular.
How is NAME enabling efficient OTC transactions and expanding market opportunities for distribution utilities and other participants?
NAME offered the first ever national-level platform to discoms to list their requirements for banking of electricity. This ensures pan-Indian broadcast, wider responses, acceptance and delivery of energy through direct interaction between members. Previously, discoms were forced to search for their requirements with other discoms on a one-to-one basis or within the region. It was an inefficient process, but discoms followed it to cover the risk of disputes/defaults by intermediaries.
In a short span since it went live, the platform has seen over 200 listings totalling over 18,000 MUs, of which 3,300 MUs have been accepted and delivered. The members have found new counterparties and, in addition to seasonal banking, have been able to undertake day-ahead, week-ahead and month-ahead banking. There has been no case of delay or dispute between the members on the platform.
The platform has expanded by allowing listing services for the sale and purchase of electricity.
How does the platform ensure payment security, contractual discipline and dispute-free settlement in compliance with regulations?
Price is the decision to trade in this market and payment security is an integral component of a deal as it assures security for sellers and ensures that buyers back up their decision with resources.
NAME has made available to members a payment solution through a top bank, in line with the Payment and Settlement Systems Act, 2007 and the RBI Guidelines on Payment Aggregators and Payment Gateways. Built on it is a penalty mechanism to which members commit themselves if they fail to meet procedural or financial obligations. Thanks to the computational services emanating from the decisions taken by members on the platform, the members have reports and details to facilitate the physical and financial flow of electricity. The financial flow is based on delivered energy, thereby eliminating the possibility of disputes among members. This improves confidence and ensures compliance with regulations.
DAMINI & SPANDAN, the listing services for the sale and purchase of electricity, have seen over 330 listings totalling to 5,100 MUs, and seamless physical and financial flow for all accepted listings.
How does the OTC platform align with the evolving policy and regulatory vision for market-based development of the sector?
The Ministry of Power outlines the vision and direction for the market. Based on the core principles of competition, transparency, consumer interest, discipline and fairness, electronic power market platforms have found a mention in the draft Amendment to Electricity Act, Shakti Policy, Guidelines for designating REIA, draft National Electricity Policy, etc. The platform operates as an open, transparent and competitive marketplace and ensures that members participate with fairness and integrity.
Based on the implementation experience of the OTC platforms, the CERC proposed a draft amendment to the Power Market Regulations, 2025. A few suggestions from policymakers, regulatory commissions and distribution companies are as follows:
CEA
We reiterate our comments given in response to the CERC draft order dated October 4, 2024 on the working of TAM that standard contracts should be traded on the exchange while non-standard tailor-made contracts, as per the requirements of the procurer, should be traded through other mechanisms including OTC platform.
Assam Electricity Regulatory Commission
The commission welcomes and supports the central commission’s initiative to promote OTC platforms under a regulated market infrastructure institution framework. We believe that OTC platforms will play a crucial role in redefining India’s power market.
Andhra Pradesh PPCC
We would like to put on record that after the introduction of the OTC platform by the CERC, APPCC has been able to identify new counterparties and competitive counter offers through the screen-based facility provided by the OTC platform. The OTC platforms also bring much-needed transparency to the OTC market, especially in power banking/swapping. The OTC platform digitalised the entire process and brought it on a single screen. It also provides a secure data base, maintaining the historical data and user activity, which assists in making informed decisions for the future.
Tamil Nadu Power Distribution Corporation Limited (TNPDCL)
TNPDCL’s power purchase wing shares its feedback on the OTC platform. It appreciates the robust set of features it offers, particularly for seasonal banking, day-ahead banking and data analysis.
TNPDCL believes continuous development of the platform will further support market participants and contribute to the growth of a more efficient and transparent energy market.
The platform has been recognised in the resource adequacy regulations by many SERCs. NAME has thus been able to implement the vision of policymakers and fulfil the envisaged role in the regulations by facilitating direct interaction and reducing information asymmetry in the OTC market.
What are the initiatives taken for developing the data repository?
NAME has made available to its members the transaction data at one place to ease decision-making through its data dashboard SPASHT (Short-term Prices Assimilated Schedules Harmonized for Transparency). NAME believes that digitisation must not only be a strategy but also an instrument, a medium, action and the end goal for a fully reported and adequately monitored power market.
Electricity is a special commodity. It cannot be stored and supply has to match demand at every instance. Thus, a time stamp is an implicit, integral and inseparable part of the price as well as the value of electricity.
As a CERC-designated data repository for buyers and sellers, we are keen to contribute to the fulfilment of the legislative mandate for the CEA to collect and record the data. The harmonisation and centralisation of the scattered information/reporting will benefit all stakeholders. The SPASHT platform needs to be developed into the regulatory reporting platform for stakeholders so that it becomes the single source of truth.
What role will OTC platforms play in shaping the next phase of India’s power market, including new products and long-term markets?
With a broader scope of contracts in the OTC market (banking, sale and purchase of electricity, renewable energy, capacity contracts, certificates, VPPAs, storage, peer-to-peer trading, etc.) the market is poised to grow.
Every change brings with it disruption for the common good of market participants. We have seen this in equity markets and commodity markets, and now it is the turn of the power markets.
A centralised computational service in the OTC market for contract settlement is likely to be a valuable interconnector between stakeholders, financial institutions and regulators to provide intermediary support and services needed by the sector.
Participants will also benefit from computational services, serving as value-added services for risk management, collateral management, performance measurement and reporting. These services would promote financial discipline; reduce settlement cycles, working capital and transaction costs; and improve overall market health.
To know more click here