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Terms of Reference/Scope of Work on developing the Model Framework for Trading licence regime and Guidelines for

Grant of Trading licence in SA countries

Rajiv Ratna PandaHead-Technical, SARI/EI/IRADe

6th Meeting of Task Force 2 on Advancement of Transmission Systems Interconnection and

3rd Meeting of Task Force 3 on south Asia Regional Electricity Markets

20th April, 2016 | Pan Pacific Sonargaon, Dhaka, Bangladesh

Terms of Reference-Model Framework Guidelines- Open Access Regime in Transmission and Trading licence for both Domestic as well as for CBET/Rajiv/SARI/EI/IRADe

India :Currently electricity trading is licensed activity in India i.e. for Domestic electricity trading and is governed byCERC regulations Procedure, Terms, and Conditions for Grant of Trading License and Other Related Matters(2009).

Bhutan : In Bhutan-The Electricity Act of 2001 recognizes export and import of electricity as licensed activities.The BEA issues licenses and monitors the performance of the licensees to ensure compliance with the provisions ofActs, Regulations, Standards, Codes, etc., For instance, the Bhutan Electricity Authority (BEA) has granted license toDagachhu Hydropower Corporation Limited (or Licensee) to carry out the activities of construction, generation,supply, and export.

Bangladesh: The Bangladesh Electricity Regulatory CommissionAct of 2003 does not mention export and import of electricityas a licensed activity.

Other SA countries do not have any trading licenses regimes.

On CBET front, currently trade is happening through NodalAgencies (traders) such as PTC, NVNL between India-Nepal andIndia-Bhutan.


Back ground-Trading licence in SA countries

Guideline 1: Licensing Cross-border Electricity Trade Activities, Imports And Exports

Rationale

Since countries have different licensing rules and procedures, a harmonized licensing framework

ensures that licensing does not restrict entry. It provides regulatory tools that helps regulators to keep

an oversight of the market

National regulators to define the process of obtaining and issuing licenses for CBET

subject to their national Legal & Policy requirements

1

Member countries shall aim to recognize CBET as a distinct licensing activity through

amendments in existing laws or regulations or through enactment of enabling regulations

2

3

Provisions to

include

The license shall impose conditions to comply with prescribed planning and technical

standards and may also require the licensee to provide specific information as deemed

necessary by the regulator/designated entity

4

In the absence of the regulator, grant of license shall rest with relevant Ministry/

Government body. Summary to be made public

5

SAARC –IGFA-

Article 13-Facilitating Buying and Selling Entities Member

States shall enable Buying and Selling Entities to engage in

cross-border electricity trading subject to the laws and

regulations of the concerned Member States.

PTA-India-Nepal

ARTICLE-IV-The Parties shall allow the authorized/licensed

electricity producers/ buyers/traders of each country

to engage in cross-border electricity trading, including that through Power Exchanges, and

to seek cross-border transmission access as per the laws of the respective country.

Background : SAARC IGFA,PTA and Task Force -1 Study : Regional Regulatory Guidelines

A. Objective of the Study

A. The objective of the study is to develop the ModelFramework for Trading licence regime and Guidelines forGrant of Trading licence in SA with a view to initiate/advancepower trading in SA countries as well as for facilitating CrossBorder Electricity Trade (CBET) Region.


B. Scope of Work (SoW)/Terms of Reference (ToR)1. Review and analyse the prevailing framework/regulations/procedures relating to Trading licence regimes and

for grant of trading license from the perspective of developing Model Guidelines and Framework/Procedures for grant of trading license in SA Countries both for domestic as well as Cross Border Power Trade.

2. Review and analyse the prevailing institutional structure/arrangements for granting trading license in SA countries.

3. Review and analyse the international best practices (with particular focus on Indian experience) on Trading licence regimes and for grant of trading license in the context of domestic power sector as well as from the perspective of Cross Border Electricity Trade/Regional Power Markets particularly focusing on:

Key ingredients for Trading licence regimes and for grant of trading license. Key governing and enabling factors lead to the implementation of Trading licence regimes and for grant of

trading license. Challenges associated with implementation of Trading licence regimes and for grant of trading license and

key learnings. Requirements of being an electricity trader, procedure for grant of licence, terms and conditions of the

licence, obligations of the licensee and revocation of licence and other key aspects associated with grant of trading licenses.

Role of power traders and how power traders have impacted the development of power market.

Scope of Work (SoW)/Terms of Reference (ToR)4. Assess and analyse the views of key stakeholders (country wise) such as Regulators, Transmission Utilities, PowerGeneration Companies, Power/Energy Ministries, Independent power procedures etc. with respects to Tradinglicence regimes and for grant of trading license with a view to enhance power trading and CBET in SA countries.

1) To submit draft report on Review/Analysis and key findings emerged from the Scope of Work/Terms of Reference.

2) Develop Suggested draft Model framework for South Asian Countries Trading licence regimes and for grant of

trading license both for domestic as well as for Cross Border electricity Trade.

3) Based on the above (C 2), Develop Suggested draft Model set of guidelines for grant of trading license covering

requirements of being an electricity trader, procedure for grant of licence, terms and conditions of the licence,

obligations of the licensee and revocation of licence and other key aspects of the grant of trading licenses etc.

(both for domestic and cross Border electricity Trade). It will also include various standard formats such as a)

Application form b) Grant of trading licenses and other required formats.

4) To submit final Model Framework and Guidelines for Trading licence regimes and for grant of trading license afterincorporating suggestions and inputs of various stakeholders such as Regulators, Transmission Utilities, PowerGeneration Companies, Power/Energy Ministries, Independent power procedures, TF Members, USAID,SARI/EI etc.

c. Deliverables:

Thank You


Role of Power Trader


From a buyers perspective , traders 1. Arrange off-take of power as made available by the seller 2. Identify buyer for off-take of contracted capacity and

enter into requisite commercial agreement on back to back basis

3. Manage entire transaction such as Open Access, scheduling, Energy accounting & other system compliance/approvals

4. Co-ordinate with relevant agencies for transfer of power5. Facilitate sale of power to third party from alternate

sources in case of short off-take by original buyer 6. Ensure payment security and Facilitate energy

settlement 7. Ensure power for testing & commissioning of Power

station/Transmission lines.

From a sellers perspective, traders

1. Arrange power as per requirement of buyer2. Identify Seller for supply of contracted capacity and enter

into requisite commercial agreement on back to back basis3. Manage entire transaction such as Open Access,

scheduling, Energy accounting & other system compliance/approvals

4. Co-ordinate with relevant agencies for transfer of power5. Facilitate supply of power from alternate sources in case of

generator outages6. Ensure supply comfort (Contract performance)g) Supply of

power to Industries/large consumers.

Electricity Trader plays a crucial role in optimization of existing energy resources and bring vibrancy to commercial outlookin the power market. Some of key role/functions played by trader are a) Act as Counter Party b) helps in liquidity of the

market c) finds new ways/opportunities to mitigate risks d) Facilitate attraction of capital to the generation and Transmission Inter-connections e) Bring transparency to the markets f) Remove Information Asymmetry g) Expand

transactional opportunities.

1.5 1.5 3 3.5 4 57

10

1.5

8

15

25

35

40

50

60

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

2007 2012 2017 2022 2032 2037 2042 2047

Electricity Import (GW) by India from Neighbouring Countries

Import Least Effort( GW) Import Dertermined Effort ( GW)

Import Aggressive Effort ( GW) Import Heroic Effort ( GW)

0.2 0.21 1

1.52 2 2

0.2 0.21

2

3.5

5

7

10

0.0

2.0

4.0

6.0

8.0

10.0

12.0

2007 2012 2017 2022 2032 2037 2042 2047

Electricity Export (GW) from India to Neighbouring Countries

Export Least Effort ( GW) Export Dertermined Effort ( GW)

Export Aggressive Effort ( GW) Export Heroic Effort ( GW)

Source: The IESS, 2047 ,Niti Ayog (Erstwhile Planning Commission) ,GOI

India: Cross Border Electricity Trade Export and Import by India from Neighbouring Countries

48 48

257112 128 161 225

321

48

257

482

803

11241285

1606

1927

0

500

1000

1500

2000

2500

2007 2012 2017 2022 2032 2037 2042 2047

Electricity Import (BU) by India from Neighbouring Countries

Import Least Effort(BU) Import Dertermined Effort (BU

Import Aggressive Effort (BU Import Heroic Effort (BU

1

32 3248 48

64 64

1

32

64

96112

161

321

0

50

100

150

200

250

300

350

2007 2012 2017 2022 2032 2037 2042 2047

Electricity Export ( BU) from India to Neighbouring Countries

Export Least Effort(BU) Export Dertermined Effort (BU

Export Aggressive Effort (BU Export Heroic Effort (BU

Terms of Reference-Model Framework Guidelines- Open Acess Regime in Transmission and Trading licence for both Domestic as well as for CBET/Rajiv/SARI/EI/IRADe

Graph: Developed by Rajiv. Date Source: The IESS, 2047 ,Niti Ayog (Erstwhile Planning Commission) ,GOI Graph: Developed by Rajiv. Date Source: The IESS, 2047 ,Niti Ayog (Erstwhile Planning Commission) ,GOI

Graph: Developed by Rajiv. Date Source: The IESS, 2047 ,Niti Ayog (Erstwhile Planning Commission) ,GOI Graph: Developed by Rajiv. Date Source: The IESS, 2047 ,Niti Ayog (Erstwhile Planning Commission) ,GOI

Possible -Phases of Market development for CBET


Nodal Agency

Deemed Trading Licence

Trading Licence

OTC Markets

Spot Markets on exchanges Auction

Markets

Derivatives, financial

Products etc. Continuous

Trading

Mar

ket

Mat

uri

ty

Time

Possible -Phases of Market development

for CBET

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