The electricity market has been evolving towards alternatives that provide greater reliability and flexibility to the system. Last year, the Creg issued a resolution certifying Derivex as the first Standardized Anonymous Market for Energy contracts.
Its manager, Juan Carlos Téllez, explained that with this mechanism energy buyers can be shielded in part from the variations of the indexers. In fact, he pointed out that the price per kilowatt for the end of this year was trading around $240.
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What is Derivex’s operation in the market?
This is an organized market that has been endorsed by the Government and in which securities are traded. Basically we are a securities trading and registry system and that already has a well-structured regulatory framework in which the law establishes that future electric power contracts are considered securities.
These markets have a central counterparty clearing house.
What is the future margin handled by these contracts that are traded?
We have been adjusting the market to the needs. You have to understand that these are financial products and electricity is not dispatched. We have adapted the market to six years of contracting but our contracts are monthly.
This is one of the benefits, that agents in the sector can carry out coverage in some particular months taking into account the seasons and weather forecasts.
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How is this different from a bilateral contract?
In these cases, the agent makes a call, but these calls are for annual periods, and it is very difficult for energy to be sold for a specific period. We have 72 monthly contracts, which are six years.
Did you award contracts for this El Niño phenomenon?
Yes. The first thing is that since 2010 this company was created and there were some agents in the electricity sector who carried out transactions to meet the demands of those regulated. As of 2018, the Creg issued a resolution that allows new entities to present a marketing mechanism for regulated demand and as of last year it endorsed and certified that Derivex complies with all these requirements.
In this context, we have organized some calls for auctions in which the reference prices are formed that the marketers can transfer directly to the rate.
Today we are carrying out two calls a month since 2021, but at that time it was one more enlistment issue. In October we made the first call and it was made at prices of $343, quite competitive considering that the average price this year is above $400.
If this resolution had come out two years ago, today we would have fixed prices of $240, without indexing.
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How is the price estimated for unindexed futures contracts?
This is something that the generator has to evaluate when it is going to make its offers in the market. When looking at inflation indicators, it is not directly proportional to the impact of a generator, so what generators do is that they incorporate some inflation expectation into their price and offer a single price.
In bilateral contracts, inflation is taken into account, but not only that. Credit risk is taken into account and I believe that this is the strength that the Creg was looking for in this type of mechanism to ensure that the user is protected with a more efficient price.
As we are an anonymous mechanism, there is no such discrimination in the market.
Could an auction of the Ministry of Mines and Energy be called through Derivex?
Sure, and that would actually be a very good initiative, but it would be necessary to hold an auction with the characteristics of this market. This may be an initiative that the Government can use for a specific issue, for example, to attend to some particular periods when there is high exposure to the stock market.
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How much energy has been traded?
We started the first call in October of last year, we had awards at prices of $340 pesos for 2023.
As of today we have made 14 calls in which around 128 gigawatts have been negotiated, which represents around 357 contracts. In amount we are talking about movements of about $50,000 million in these months.
More liquidity is required
Juan Carlos Téllez, manager of Derivex, pointed out that the mechanism of the Standardized Anonymous Market has a series of advantages for the system. However, he noted that greater liquidity is still required.
“A virtuous circle is formed, if the generators begin to offer more energy through Derivex and there may also be other participants, it will make the market much more competitive,” he explained. To this he added that more agents are required to participate in the market and a greater supply of energy that allows the market to gain more depth.
DANIELA MORALES SOLER