Opponent A attacks opponent B with a Power challenge with a claim of 2

Opponent B plays Red Vengeance

Does this mean that Opponent A has to discard 2 power from his house as he is now the loser of the challenge and must pay the claim ?

This is actually addressed in the FAQ portion of the FAQ:

How does Red Vengeance (Princes of the Sun F25) work during a power challenge?

The opponent chosen to satisfy the claim of a POW challenge moves power from his or her House card to the attacking player's House card. In some instances, this could amount to a single player moving power from his or her House card back to his or her House card.