Drop in Merchant Power Demand?

The Indian Electricity Exchange started operations over a month ago and some of the trends in the day ahead market (the so called merchant/spot) market have been interesting. The peak tariff went up close to 9 rs/kwh and now has moved back to close to 6 rs / kwh (currently we may even have excess capacity, almost as if the power companies prefer load shedding rather than buy expensive power).

IEX is promoted by the Financial Technologies (there is another Power Exchange too promoted by the NSE) and has some key players with stakes in it. Currently the regs are a bit unclear (ahem - when were they clear? ) on who will regulate the prices (you cant allow profiteering you see). The govt. also might want to control the prices because buying/selling electricity is a zero sum game.

Each state is allocated a certain quota based on its requirements (given by the SLDC s to RLDC s to the national grid). If you overdraw, it becomes kind of an overdraft and that would force the defaulting state to pay up. So states can make a killing by managing their demand effectively.

A quick download:

Source of fuel: Non-thermal power plants can ride the merchant game much better because they can be switched on that much faster. Thermal plants cannot really be shut down and hence their ability to service the spot market entirely is questionable.

Transmission: Regional Load Dispatch Centers to State Load Dispatch Centers to the national Grid on the broad level. Transmission returns are still regulated (the new CERC ROE applies to transmission too? ).

Contracts: Contractual obligations are usually over 10 years, you just cant sign variable fuel contracts in the country.

How does it work? Power traders buy capacity from producers (PTC, Adani etc) and sell it in the day ahead market (producers need to give the schedule of availability in intervals 24 hr s before production).

There is likely to be a pricing upturn close to the elections as every party will maximize power availability in this parts of the country. Any clue on how to trade this?