Petition No. 26/2010. Case: In Re: Indian Energy Exchange Ltd. and Power Exchange of India Limited Vs. Central Electricity Regulatory Commission
Case Number | Petition No. 26/2010 |
Counsel | For Appellant: M.G. Ramchandran, Hemant Sahai, Payal Chawla, Jayant Deo, Akhilesh Awasthy, Bikram Singh, R.K. Mediratta, Advs. and S. Ganguly, VP, For NLDC: S.S. Barpanda and S.C. Saxena, Advs. And For NRLDC: Jyoti Prasad, Adv. |
Judges | Pramod Deo, Chairperson, S. Jayaraman, V.S. Verma and M. Deena Dayalan, Members |
Issue | Electricity Act, 2003 - Sections 2(26), 2(71) and 142; Power Market Regulations, 2010 - Regulations 26, 30 and 31 |
Judgement Date | June 03, 2010 |
Court | Central Electricity Regulatory Commission |
Order:
1. The Commission in its order dated 24.12.2009 in Petition No. 117/2009 had directed Indian Energy Exchange and Power Exchange of India Limited, Respondent Nos. 1 and 2 herein respectively, as under:
16. Having heard the parties, and after considering the materials placed on record, we are of the view that, though professional members transacting on the power exchange do not own the title of the electricity being transacted in the platform of the power exchange making them different from the traders who by virtue of purchase of electricity own the title of the electricity purchased before selling it, there may be scope for ambiguity. By undertaking obligations of risk of delivery/off-take of underlying units of electricity related to transactions, there could be an element of mischief as members of power exchange not only function as brokers but also provide credit facility as well as indemnify the exchange by taking the financial risks/claims arising out of non delivery of electricity by clients of such members. Although, in the current regulatory framework, the members are not "Electricity Traders" within the meaning of Section 2(26) of the Act, in view of the apprehensions raised in the present application and in order to arrest the possibility of any mischief it is necessary to clarify the role of the members. Accordingly, the role of members other than the trading licensees and the grid connected entities, being that of a "facilitator" would be only to provide the following services:
(a) IT infrastructure for bidding on electronic exchange platform;
(b) Advisory services related to power prices and the follow on bidding strategy (e.g. weather related information, demand supply position etc);
(c) Facilitation of procedures on behalf of his client for delivery of power (e.g. SLDC standing clearances, coordination with NLDC etc.)
17. We direct that the members of power exchange who are not trading licensee shall not provide any credit or financing or working capital facility to their clients.
18. We further direct that the Power Exchanges shall incorporate the role of the members as stated in para 16 and 17 above by amending their bye-laws, business rules and other related documents immediately and submit compliance within a period of one month. Till the time the above directions are complied with, the Respondent power exchanges shall not permit members other than the trading licensees and those connected to the grid to transact on their exchanges in any manner other than as directed above.
2. Subsequently, the Commission in its order dated 15.2.2010 had further directed the Respondents to confirm on affidavit about the compliance of the directions contained in the aforesaid order dated 24.12.2009 in Petition No. 117/2009 and to submit a complete list of members who were acting as facilitators and all transactions carried out by these members for their clients from 25.12.2009 till 15.2.2010, supported by documentary evidence that no credit, financing or working capital facility was provided by such members for transactions of their clients.
3. Respondent No. 1, in its affidavit dated 9.3.2010 and Respondent No. 2 in its affidavit dated 22.2.2010 submitted their replies and pleaded that they had not contravened the order dated 24.12.2009 in Petition No. 117/2009. While submitting a list of its members, Indian Energy Exchange submitted details of all transactions carried out by active members from 25.12.2009 till 15.2.2010. The submissions of Indian Energy Exchange show that these members have ensured that their clients maintain adequate arrangements with them to discharge the financial obligations arising out of transactions that may be contracted on behalf of the clients and that financial settlements have been done through money of the clients although a Chartered Accountants certificate was annexed stating that no credit has been provided by these members to their clients during the aforesaid period. From the submission of Power Exchange of India Limited it is observed that PFC has made payment of Rs. 49,134,820 as credit in discharge of the obligations of JVVNL to the exchange.
4. The Commission after considering the replies of the Respondents issued a show cause notice vide its order dated 30.3.2010 as under:
5. From the data furnished by the both respondents, it is observed that our directions in order dated 24.12.2009 appear to not have been complied with in letter and spirit. The members other than trading licensees and grid connected entities who are required to act as facilitators only and provide limited services as mentioned in para 16 of our order as extracted above appear to continue to provide banking transaction services to their clients. In case of First Respondent, clients have deposited money in the Settlement Bank Account of the facilitators who in turn have transferred this money to the bank account of the exchange. This is in contravention of our order which does not permit the facilitators to handle money on behalf of their clients. In case of the Second Respondent, there appears to be a violation of para 17 of our order dated 24.12.2009 as the professional clearing member has been allowed to extend the credit facility to its client from 24.12.2009 till 21.1.2010.
6. In view of the above, we direct both the Respondents to show cause by 5.4.2010 as to whether contravention of our directions contained in para 16 and 17 of the order dated 24.12.2009 in Petition No. 117/2009 have been made out against them and consequently, why penalty under Section 142 of the Electricity Act, 2003, without prejudice to any other penalty which may be imposed under the Act, should not be imposed on them for contravention of the directions of the Commission.
5. The Commission directed both the respondents to show cause as to why they should not be held responsible for contravention of the directions contained in paras 16 and 17 of the order dated 24.12.2009 in Petition No. 117/2009 and as to why penalty under Section 142 of the Act should not be imposed on them.
6. Both the respondents have filed their replies to the show cause notice. We have also heard the learned Counsel appearing on behalf of the respondents.
Reply of Indian Energy Exchange
7. Respondent No. 1 in its reply dated 5.4.2010 has submitted that the following alleged incidences of non-compliance of the Commission's Order dated 24.12.2009 and as contained in the show cause notice dated 30.3.2010, are in fact not any contravention:
(i) banking transaction services provided by members other than trading licensees and grid connected entities to their clients,
(ii) depositing of money by clients in the settlement bank account of such members and
(iii) transfer of such money by such members to the bank account of the exchange, Such members have allowed deposit of money in the Settlement Bank Account of the Member (these are other than Trading Licensee and Grid connected entities) (hereinafter referred to as "Member-Facilitators") by the clients which money has been used by the Member-Facilitator to remit the amount to the exchange which is not permitted in terms of the order dated 24.12.2009 in Petition No. 117/2009. Such deposit of money by the clients in the Settlement Bank Account of the Member-Facilitator has been stated to be construed as a banking transaction service provided by the Members to their clients. Respondent No. 1 has submitted that Para 17 of the...
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