The exchange provides price discovery or in other words lowest available price because of the participation of large number of buyers and sellers. Discoms can ofcourse do off exchange trades and they do it even now when they really need it . This happened a few months ago when exchange prices were capped . Gencos sold it at higher prices off-exchange to the discoms.
However, unless the discoms are ready to pay higher prices than the exchange price, gencoes have no reason to sell off exchange.
I also do not understand the arm twisting angle …so the states can spend on populist giveaways and default on their payments to creditors at will endlessly and if they are made to pay by some pressure ,its armtwisting ? If so,I am all for it …twist and even yanking it off is fine as long as tax payers money is saved from going down the drain in crazy votebank enhancing schemes.
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