Recently, the Central Electricity Regulatory Commission (CERC) came out with a draft Central Electricity Regulatory Commission (Power Market; Second Amendment) Regulations, 2026, introducing reforms aimed at advancing market coupling. This follows an earlier order dated July 2025. CERC has called for public comments on the draft regulations.

‘Market coupling’ is a mechanism in electricity trading where power exchanges are linked and electricity prices are discovered through a common, central process rather than separately on individual exchanges. Instead of buyers and sellers on different exchanges finding different prices for the same time slot, all bids are pooled and matched, leading to a single market-clearing price and more efficient use of transmission capacity.

CERC believes that without market coupling, each of the three power exchanges in India — Indian Energy Exchange (IEX), Power Exchange India Limited (PXIL), and Hindustan Power Exchange (HEP) — has its own pool of buyers and sellers. If one exchange becomes dominant, then it will continue to grow at the expense of the others — because liquidity attracts more liquidity.

However, with market coupling and pooled bids for price discovery, even if a buyer places an order through PXIL and a seller through IEX, they are effectively participating in the same market and get the same clearing price. That means participants can choose an exchange based on the service, fees, technology, or contracts — not just liquidity.

Sole operator

The draft regulations designate the government-owned Grid India as the sole market coupling operator (MCO) — a departure from the July 2025 order, which had proposed a rotation among the three exchanges, with Grid India serving as the fourth MCO for backup and audit purposes.

As the sole MCO, Grid India will aggregate bids across the three exchanges and discover a uniform market-clearing price.

Grid India is required to formulate a detailed power market coupling procedure (PMCP) within six months of the amendment notification, outlining the operational framework for market coupling. The PMCP will define the roles and responsibilities of the MCO, power exchanges, and the National Load Despatch Centre; specify operational timelines and sequencing for coupling sessions; prescribe encryption/ decryption protocols; detail the price discovery algorithm; and establish procedures for bid handling, scheduling, delivery, accounting, and clearing and settlement.

Mixed response

While the regulator’s view is that market coupling makes room for multiple power exchanges, which can in turn create competition among them, others observe that it penalises the exchange (IEX) that brought in products and innovation and built the market, while rewarding the under-performers.

IEX, obviously, is not in favour of the proposal. Asked for a comment, Rohit Bajaj, Joint Managing Director, IEX, observed that the regulations would be finalised only after stakeholder comments. “However, in the present form, the draft does not serve any interest of consumers and does not meaningfully enhance market depth,” he told businessline.

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Published on April 27, 2026