CERC Moots New Norms for Market Coupling Across Power Exchanges

The Central Electricity Regulatory Commission (CERC) has released Draft Regulations to implement "Market Coupling" in India. This will be the Power Market (Second Amendment) Regulations, 2026. (Market coupling is an energy market model that aggregates buy/sell bids from multiple power exchanges, using a central algorithm to discover a uniform, efficient market clearing price).

It is meant to unify power prices across all energy trading platforms - IEX, PXIL and HPX. They operate separately, resulting in consumers paying differently for same unit of electricity. To check this abnormality, a central agency, Grid India (Grid Controller of India Ltd) has been designated as the Market Coupling Operator (MCO). It will collect bids from all exchanges to arrive at the final market price. Grid India is expected to finalize the operational procedures within six months of the final notification.

The industry has until May 16, 2026, to submit feedback before the rules are finalized.

OUR VIEW:

(Mr Tanish Agarwal, student, Jindal Global Law School at O P Jindal Global University)

Market Coupling in India's Power Sector: Reform, Risk and Reality

The reforms:

The year 2003 saw the Electricity Act shattering the Government Monopoly on the sector. Regulatory reforms set in, as CERC and SERCs were established as independent watchdogs. CERC was mandated to develop a competitive power market.  

India's competitive push:

• In 2005, applications submitted to set up Power Exchanges. Indian Energy Exchange (IEX) becomes operational in June 2008. Power Exchange of India Limited (PEX) launches in Oct 2008, followed by Hindustan Power Exchange (HEX) in 2022.

Dominance problems in Exchanges:

• IEX has 85%+ overall market share - including ~99% in the critical DAM (Day-Ahead Market) and RTM (Real-Time Market) segments. The other Exchanges participate mainly in the TAM (Term-Ahead Market) segments. IEX had a first mover advantage and higher participants in the critical segments enabling higher number of bids getting cleared with better price discovery.

Global benchmarks:

• Europe: Market coupling was designed to erase physical borders, not regulate corporate monopolies. It achieved 87% efficiency in cross-zonal capacity usage by 2020.

• Australia: Operated by Government-run, non-profit single operator - not, competing corporate exchanges.

• US: Run by non-profit entities regulated by FERC.

• Unlike Europe, which introduced market coupling first and then opened the unified market to competition, India did the reverse of introducing competition first and then attempting market coupling for the existing exchanges. 

The Regulatory journey to Market Coupling:

• In August 2023, CERC released the paper proposing market coupling. In Feb 2024, it directs Grid India to execute a shadow-pilot using historical data. This study ran from Dec 2024 to March 2025. In July 2025, CERC issues formal directions to implement market coupling in the DAM segment.

The promise by CERC:

 • Uniform Market Clearing Price, Optimal Transmission Utilization and Economic Surplus Maximization.  

Systemic Risks - The case against the algorithm:

• The pilot study revealed that coupling yields minimal financial benefits because IEX practically acts as a coupled market due to its 99% dominance. That is the Monopoly reality.

• Untested technology risks peak-demand blackouts.

• Exchanges become mere bid collectors, repelling new investments.

• Overhauling the system to optimize the mere 7-10% of electricity traded on exchanges yields minimal grid-wise impact.

Please find the full report ​here​.

______________________________

Related Article 

•https://www.business-standard.com/industry/news/cerc-proposes-market-coupling-to-unify-power-pricing-across-exchanges-126042000983_1.html

•https://www.business-standard.com/industry/news/cerc-draft-regulations-on-mkt-coupling-do-not-serve-consumer-interest-iex-126042401325_1.html