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CERC to audit price discovery mechanism at power exchanges

business Updated: Apr 24, 2011 12:15 IST

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The Central Electricity Regulatory Commission will audit the price discovery mechanism being used at the country's two power exchanges -- Indian Energy Exchange and Power Exchange India.

At power exchanges, utilities and other electricity providers offer to sell a specific quantity of energy at a particular price while potential purchasers submit their bids.

These exchanges help in discovering the price of power based on the principle of demand and supply.

The commission (CERC) has already invited bids for audit of trading software algorithm used by the power exchanges for price discovery.

The audit would look at whether market rules and regulations are being adhered to in the price discovery process.

A senior CERC official said that international entities are expected to participate actively in the bidding process.

According to the official, a consortium would have to do the auditing, especially since there are not many players with expertise required for such a project.

As per the set eligibility criteria, the bidder should have been in existence for at least five years as well as a average annual turnover of Rs 25 crore from the businesses "relevant to this project".

The successful bidder can also collaborate with other companies with niche expertise and academic institutions, among others.

Power Exchange India COO Gyan Mohan said existing method of price discovery at power exchanges is doing well.

He pointed out that there would not be any problem for the existing mechanism with increasing volumes.