The Central Electricity Regulatory Commission (CERC) will notify the regulations for the much-aniticipated but contentious market coupling mechanism in the next four to six weeks, a move that could alter the dynamics of power trading in the country with the introduction of a uniform market-clearing price.
The regulator revealed the plan to the Supreme Court on Tuesday, setting at rest speculation that the process may be delayed. Grid India had earlier flagged unresolved concerns over scope, software robustness, settlement, cost allocation and the risk of a single point of failure in case the mechanism is introduced at this juncture.
The apex court dismissed the Indian Energy Exchange (IEX) challenge to the proposed mechanism as premature, saying the regulations governing the electricity-trading reform were yet to be finalised. In its order, the court allowed the regulator to continue its rule-making process but refrained from according judicial approval of market coupling or its proposed design at this stage.
A Bench of Justices P S Narasimha and Alok Aradhe observed that it was “not the appropriate stage” to examine IEX’s objections. The court expressed no opinion on the dispute’s merits and left the exchange free to challenge the regulations after their notification.
“We respect the observations of the Hon’ble Supreme Court and the ongoing regulatory process being undertaken by CERC,” said Vivek Singla, managing director and chief executive officer of Power Exchange India (PXIL), another player in power trading.
In simple terms, electricity prices are currently discovered separately on each exchange by matching purchase and sale bids received on that platform. Market coupling would combine bids from all exchanges, run them through a common system and produce one clearing price for a particular delivery period.
CERC had directed phased implementation of coupling, beginning with the day-ahead market, where electricity is contracted a day before delivery. The proposed arrangement envisages power exchanges taking turns as the market-coupling operator, with Grid-India serving as the backup and audit operator. Coupling of the real-time and other market segments was to be considered after further pilot exercises and consultations.
The regulator maintains that pooling orders can improve price discovery, transparency and system efficiency. India has three power exchanges: IEX, PXIL and Hindustan Power Exchange.
IEX, the dominant player, argues that the mechanism could weaken competition by pooling prices across exchanges and undermine the existing exchange-led model. It had sought judicial intervention against CERC’s process, contending that coupling was not warranted under current market conditions. IEX did not respond to queries until the time of going to press.
The dispute will now return to the regulatory stage. The final rules will determine the coupling mechanism, exchanges’ responsibilities and implementation process, with the legal merits open for examination after notification.