1. INTRODUCTION

Digital market surveillance in energy exchanges refers to the use of digital technologies, automated monitoring systems, data analytics, and artificial intelligence to supervise electricity and other energy markets. Its primary objective is to detect market manipulation, insider trading, price distortion, unfair trading practices, collusion, and other activities that may undermine the integrity of energy markets.

Modern energy exchanges operate through electronic trading platforms where electricity, renewable energy certificates, and other energy-related products are traded. These markets involve generators, distribution companies, electricity traders, market operators, and consumers. Because electricity cannot be stored economically at unlimited scale and supply must generally balance demand in real time, energy prices can fluctuate significantly. These characteristics make energy exchanges particularly vulnerable to strategic bidding, artificial scarcity, and manipulation of market prices.

Digital surveillance therefore plays an important role in ensuring transparency, competition, accountability, and consumer protection. It also supports the broader objectives of energy law, including reliable electricity supply, fair market access, efficient resource allocation, and the development of competitive energy markets.

2. MEANING AND NATURE OF DIGITAL MARKET SURVEILLANCE

Digital market surveillance is the continuous or periodic examination of trading activities through electronic systems to identify suspicious transactions, unusual price movements, abnormal bidding patterns, and possible violations of energy-market regulations.

It generally involves the following activities:

Real-Time Monitoring: Monitoring electricity bids, offers, transactions, and market prices as trading takes place.

Algorithmic Detection: Using computer algorithms to identify unusual trading behaviour and possible manipulation.

Data Analytics: Comparing historical prices, trading volumes, generation availability, demand forecasts, and transmission constraints.

Insider Trading Detection: Identifying whether market participants have traded on confidential, price-sensitive information that they were not legally permitted to use.

Market Manipulation Prevention: Detecting practices intended to create artificial prices, distort supply and demand, or mislead other market participants.

Regulatory Reporting: Providing suspicious-activity reports, audit trails, and supporting evidence to competent regulatory authorities.

Digital surveillance does not automatically establish that a legal violation has occurred. Suspicious patterns must be assessed in their commercial and operational context, with due regard to legitimate reasons for bidding decisions and price movements.

3. LEGAL FRAMEWORK GOVERNING DIGITAL MARKET SURVEILLANCE

A. Electricity Regulation in India

In India, the Electricity Act, 2003, provides the principal statutory framework for electricity generation, transmission, distribution, trading, and regulation.

The Central Electricity Regulatory Commission (CERC) regulates relevant interstate electricity-market activities and has an important role in the development and supervision of power exchanges.

Section 66 of the Electricity Act, 2003, provides for the development of a market, including trading, in electricity. Section 79 establishes the functions of the CERC, including regulation of interstate transmission and related activities. Section 86 specifies the functions of State Electricity Regulatory Commissions, including relevant state-level regulatory responsibilities.

Digital surveillance must operate within the powers conferred by the legislation and applicable regulations. Depending on the market and the alleged violation, regulatory oversight may involve the CERC, the relevant State Electricity Regulatory Commission, power-exchange authorities, and other competent institutions.

B. Power Market Regulations

The CERC's applicable power-market regulations establish requirements concerning the operation of electricity markets, participation in power exchanges, market monitoring, and compliance.

Digital surveillance supports these requirements by enabling regulators and exchanges to examine bids, transactions, market concentration, price spikes, and unusual trading strategies.

Power exchanges must maintain appropriate records and comply with applicable reporting and operational obligations. However, the precise surveillance obligations depend on the regulations, directions, and market arrangements applicable to the particular exchange.

C. Competition Law

The Competition Act, 2002, is relevant where energy-market conduct involves anti-competitive agreements, abuse of dominant position, or other conduct prohibited by the Act.

Section 3 addresses anti-competitive agreements, while Section 4 addresses abuse of dominant position.

Digital surveillance can help identify suspicious bidding coordination, exclusionary strategies, or conduct that may restrict competition. Nevertheless, an unusual bidding pattern or a high electricity price does not, by itself, establish a competition-law violation.

D. International Energy-Market Regulation

International regulatory systems provide useful comparative examples.

In the European Union, Regulation (EU) No. 1227/2011, commonly known as REMIT, establishes a framework against insider trading and market manipulation in wholesale energy markets. Its amended framework strengthens aspects of market transparency, reporting, and regulatory supervision.

In the United States, the Federal Energy Regulatory Commission (FERC) supervises relevant interstate wholesale electricity markets and enforces prohibitions against energy-market manipulation under the applicable federal framework.

These approaches demonstrate the importance of combining digital monitoring with legal standards, reliable evidence, and effective enforcement.