CERC Approves High Price Bilateral Market Segment on PXIL

The Commission also approved the introduction of HP-TAM and contingency contracts

September 22, 2023


The Central Electricity Regulatory Commission (CERC) recently approved Power Exchange India’s (PXIL) proposal to introduce high price bilateral market segment.

The Commission also approved PXIL’s proposal to introduce the High Price Term-Ahead Market (HP-TAM) and contingency contracts.

The central regulator directed GRID-INDIA to submit a report on the experience and performance of HP-TAM and HP-contingency contracts within three months from the date of introduction of these contracts.

PXIl had filed a petition seeking approval for introducing a high-price bilateral market segment with contracts operating under the provisions of CERC’s Power Market Regulations 2021 on PXIL’s PRATYAY platform.


PXIL has been offering contracts in the Integrated Day Ahead Market (IDAM), Real-Time Market (RTM), TAM, Green Term-Ahead Market (GTAM), Renewable Energy Certificates (RECs), and Energy Saving Certificates (ESCs) since 2008.

On April 11, 2023, the Commission had granted approval to PXIL for the introduction of HP-DAM on PXIL’s PRATYAY platform.

PXIL submitted that since the HP-DAM contract is transacted a day before delivery, buyers get exposed to price volatility in this segment. To overcome such a situation, it would be beneficial if the eligible sellers and buyers entered the transaction much in advance.

Accordingly, PXIL proposed to introduce seven new high-price bilateral market contracts. These contracts include a high-price intra-day contract, high-price day-ahead contingency contract, high-price daily contract, high-price weekly contract, high-price monthly contract, high-price any-day single-sided contract with reverse auction initiated by the buyer, and high-price any day single sided contract with forward auction initiated by seller.

Floor Price

GRID-INDIA submitted that in organized electricity markets, price formation plays a crucial role in determining market clearing prices for energy and ancillary services. It expressed concern that implementing a floor price could weaken the market signal for flexible resources like energy storage.

GRID-INDIA argued that as more flexible resources are integrated into the market, primarily to take advantage of price arbitrage and enhance resource adequacy, the natural diurnal price variations would become more stable. Introducing a floor price would introduce rigidity into the system and may not ensure the reliable operation of the grid, it said.

In response, PXIL highlighted that the eligible entities participating in the HP-TAM segment would be the same as those eligible for the HP-DAM segment. To maintain consistency and equity in market transactions, PXIL proposed that no floor price should be implemented to introduce high-price bilateral market contracts in the contingency and TAM segments.

Eligibility of Seller

GRID-INDIA asserted that relying on market data and information gathered from various power generating stations, it had proposed permitting a broader range of entities to participate in the HP-DAM segment through a transparent and non-discriminatory framework.

Meanwhile, PXIL said entities eligible to submit offers in the HP-TAM segment should be determined based on data provided by CERC, CEA, and GRID-INDIA, allowing for the exclusive inclusion of such entities in the HP-TAM segment. Additionally, PXIL suggested that the Commission could consider allowing generators not initially identified for HP-DAM and HP-TAM to approach the Commission for potential inclusion in these segments, contingent on specific considerations.

Schedule of HP-TAM Contract

GRID-INDIA also stated that in case of unit tripping of unit size 100 MW or more, revision of the short-term open access schedule is possible. Accordingly, suitable provisions may be put in place in the contract.

PXIL said that the power exchange will settle the transaction based on the revised schedule provided by the Regional Load Despatch Center on submission of the application for revision by the generator, electricity trader, or any other agency selling power from the unit of the generating station, in case of a forced outage of a unit of the generating station

Commission’s Analysis

The Commission noted that it had approved the introduction of the HP-DAM on PXIL’s PRATAY platform through its order dated April 11, 2023.

Later, on July 24, 2023, the Commission had granted approval to the Hindustan Power Exchange for the introduction of HP-TAM and HP-Contingency contracts.

HP-DAM and Contingency Contracts

The Commission endorsed implementing HP contracts, including daily, weekly, and monthly options, with predefined time blocks that will be communicated to market participants well in advance. Additionally, the Commission authorized the initiation of one-sided contracts by buyers through a reverse auction process. It also approved the introduction of High Price Day-Ahead contingency contracts and High Price Intra-day contingency contracts.

Eligible Entities

The Commission approved the inclusion of gas-based power plants utilizing imported regasified liquefied natural gas and naphtha, imported coal-based power plants using imported coal, as well as battery energy storage systems (BESS) to participate in the high-price bilateral market segment, encompassing TAM and contingency contracts. This decision was made to ensure uniformity across various market segments.

It also said all entities eligible for power procurement through open access would also be eligible to partake as buyers in the high-price bilateral segment.

Price Discovery Mechanism

The central regulator endorsed the adoption of a uniform price step auction as the matching methodology for price determination in the case of high-price daily, weekly, and monthly contracts. This aligns with the existing approach utilized in conventional TAM contracts. It directed PXIL to implement an open auction format for the uniform price step auction to allow participants to make informed decisions by observing buy and sell bids submitted by anonymous participants.

While it approved the reverse auction methodology as the price determination matching method for any-day single-sided contracts initiated by buyers, it did not endorse the proposed any-day single-sided contracts initiated by sellers through forward auction. This was deemed inconsistent with the goal of efficient price discovery.

CERC added that since the continuous matching methodology proposed for high-price Day-Ahead contingency contracts and Intra Day contingency contracts is the same as that of the methodology followed in the existing contingency and intraday contracts and green contingency and intraday contracts, it was approving the petitioner’s proposal.

Floor and Forbearance Price

Consistent with the floor and forbearance price structure established for the HP-DAM, the Commission specified that the floor price for the high-price bilateral market segment, encompassing TAM and contingency contracts, would be set at ₹0/kWh, while the upper price limit would be capped at ₹20 (~$0.241)/kWh.

Timelines for Bidding and Delivery Duration

The Commission approved the proposed HP-TAM contracts for a maximum of three months, considering the month the transaction is made as the zero month. Accordingly, the approved delivery duration for these contracts (for the pre-specified time blocks notified to the market participants well in advance) is as follows:

  • T+2 to T+90 days for daily contracts
  • TW+1 to TW+12 for weekly contracts
  • TM+1 to TM+3 months for monthly contracts
  • T+2 to T+90 days for any-day single-sided contracts for user-defined days and time blocks

T denotes the zero-day of trading, TW denotes the zero week of trading, and TM denotes the zero month of trading, and physical delivery of electricity starts on a day more than one day ahead.

Regarding PXIL’s proposal to extend the tenure of high-price bilateral segment contracts within TAM up to 11 months through the implementation of T-GNA provisions, the Commission took note of the fact that longer-duration contracts, specifically those lasting up to three months, have not yet generated sufficient trading activity on the petitioner’s platform.

In light of this, the Commission said it will initially consider contracts with a maximum duration of three months.

It also directed that timelines and delivery mechanisms for high-price Day Ahead Contingency and Intraday Contracts shall be on similar lines to the conventional and green power in the contingency segment.

NTSD Contracts

Consistent with the stipulated terms of the non-transferable specific delivery (NTSD) contracts, the Commission directed that high-price monthly contracts may be terminated or reduced without transferring positions in cases where transmission system constraints or force majeure events occur. However, these actions will require validation from the system operator and adherence to PXIL’s default mechanism.

Renewable Purchase and Energy Storage Obligation

Regarding PXIL’s proposal to instruct GRID-INDIA to furnish information concerning battery energy storage systems (BESS) that meet the criteria as eligible entities, thereby allowing buyers to meet their energy storage obligations through separate contracts within the high-price bilateral market, the Commission acknowledged that this matter was beyond the scope of the current petition.

It directed that all other features of the high-price bilateral market segment, including TAM and contingency contracts, would be similar to the conventional and green power segment.

Further, the Commission directed PXIL to schedule these high-price contracts initiated by the buyer on the first available day following the transaction day and to abide by the following conditions strictly:

  • The contracts are settled only by physical delivery without netting
  • The rights and obligations of contract parties cannot be transferred if the contract is not executed, either entirely or partially, by any means, leading to the absence of actual electricity delivery as specified in the contract or full payment for it
  • No circular trading shall be allowed, and the rights and liabilities of parties to the specific delivery contracts will not be transferred or rolled over by any other means
  • The trading will be done only by authorized grid-connected entities or trading licensees on behalf of grid-connected entities as participants
  • The contracts may be canceled or shortened due to transmission system limitations or other technical factors, with no transfer of positions allowed. However, once a contract is canceled, it cannot be reinstated or extended in any way to continue the same transaction

The capacity offered as a sell bid in a power exchange under the high-price Daily, Weekly, Monthly, and Any day single-sided contracts initiated by the buyer from a resource in the same time block will be separate and non-overlapping.

In January this year, CERC approved Hindustan Power Exchange’s plea for introducing hydropower contracts in the GTAM beyond T + 11 days. The Commission directed HPX to incorporate the appropriate provisions in its by-laws and business rules and submit them to it within two weeks.

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