An HC bench of Justices P B Majmudar and Anoop Mohta declared that provisions under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010 dealing with futures in electricity will no longer be operative. The HC directions came while it was deciding the controversy between two regulators-FMC and CERC-on who controls futures in electricity.
The HC said that the Electricity Act of 2003 is a special law which deals with various aspects of electricity, including price fixation, market and consumer interest. The CERC, which functions under the Electricicty Act, is empowered to fix rates and govern trade in electricity, The HC, however, held that "CERC has no jurisdiction to frame any Regulations in connection with futures contract as another law-the Forward Contract (regulaton ) Act, 1952-specifically deals with that."
"Looking to the special nature of electricity as commodity and the need to regulate its price, in our view, the futures contract in electricity cannot be exclusively dealt with by FMC," said the HC. But it added, "With a view to harmonise provisions of Forward Contracts (Regulation) Act, 1952 and the Electricity Act, 2003, in our view, the futures contract no doubt is within the domain of FMC" and at the same time, CERC ought not to be denied jurisdiction since physical delivery of electricity and electricity derivative products form part of the electricity market structure under the Electricity Act.
The court was faced with two petitions filed by FMC and Multi Commodity Exchange in India (MCX) challenging the January 2010 CERC regulations which placed sole jurisdiction in approving futures trading in electricity with itself. The regulations were "discriminatory, mala fide and arbitrary", said FMC counsel Janka Dwarkadas. But CERC counsel Aspi Chinoy said that since both the laws were special enactments, the later one, which exclusively deals with electricity, must prevail.
Meanwhile, MCX, which in 2009 was given approval by FMC to launch futres trading in electricty through its online trading terminal, questioned CERC's jurisdiction to be the final auhority.
Justice Mohta in a separate judgment concurred withe the views of Majmudar. Under the law on forward contracts, 103 commodites are covered, including electricity.
Justice Mohta said, "Electricity is a nonstorable good, except when produced by hydroprojects. Trading of electricity falls within the concept of commodity trading. It may or may not be physically available all the time. This distinguishes it from other commodities under the Act that deals exclusively with all aspect of futures contracts."
Source- Times of India