CERC proposes a single, centrally discovered power price, new role for exchanges

The Draft (Power Market) (Second Amendment) Regulations, 2026, issued on April 17, introduces market coupling, under which bids from all power exchanges will be aggregated to determine a uniform market clearing price.

“Price discovery shall be done by the Market Coupling Operator… Provided that until such notification, the price discovery shall be done by the Power Exchanges,” the draft said.

Under the proposal, Grid India will act as the Market Coupling Operator (MCO). “Grid India shall function as Market Coupling Operator (MCO) and shall be responsible for operation and management of Market Coupling,” it added.

Shift from current decentralised system

The move marks a shift from the current decentralised system, where exchanges independently discover prices, often leading to multiple rates for the same electricity. The new framework aims to unify price discovery and improve efficiency across the grid.

The draft specifies that all exchanges will collect bids in a standardised format and transmit them securely to the MCO, which will aggregate them and determine prices based on “maximisation of economic surplus (sum of buyer surplus and seller surplus)”.

A uniform price will apply in unconstrained conditions, while “in case of congestion in transmission corridor, market splitting shall be adopted,” allowing regional price divergence where grid constraints exist.

The reform will initially cover the Day-Ahead Market (DAM) and Real-Time Market (RTM), with phased rollout to other segments. Grid India is required to frame a Power Market Coupling Procedure (PMCP) within six months to define operational protocols, including bid formats, algorithms and settlement mechanisms.

Industry participants said the move will fundamentally alter the role of power exchanges such as Indian Energy Exchange (IEX) and Power Exchange India Ltd (PXIL), as pricing shifts to a central operator.

Short-term market expansion

India’s short-term power market has been expanding steadily, growing 12% in 2023-24 to reach 218.22 billion units (BU), according to CERC data, underscoring the scale at which the proposed changes could play out.

“We at PXIL welcome the Draft Notification issued by the Central Electricity Regulatory Commission (CERC) on April 17, 2026, which formalizes the roadmap for Market Coupling in India. This regulatory development aligns with our long-standing vision that market coupling is the ‘need of the hour’ to address market fragmentation and sub-optimal transmission utilization,” said Vivek Singla, MD & CEO, PXIL.

He added that “the designation of Grid India as the Market Coupling Operator (MCO) provides a neutral and robust institutional framework to oversee the centralized price discovery process.”

Market experts indicated that the shift could materially alter the business dynamics of exchanges. “The move is likely to reshape revenue streams for platforms like IEX as pricing control shifts away from exchanges, potentially impacting their earnings trajectory,” said Kranti Bathini, equity strategist, WealthMills Securities, adding that increased competition across similar trading platforms could further weigh on performance.

Reflecting investor concerns, shares of Indian Energy Exchange declined sharply on the BSE — closing at ₹125.05, down 7.81% from the previous close of ₹135.65. The stock touched a low of ₹124.30 during the session.

The draft is expected to impact the business model of exchanges, with analysts indicating that the shift in pricing control could affect revenue streams and margins as exchanges transition from price discovery to platform services.

CERC said the mechanism would enable uniform pricing, better transmission utilisation and improved market liquidity by aggregating bids into a single pool.

The regulator has invited stakeholder comments by May 16, 2026, after which the framework will be finalised, marking a move towards a unified national electricity market with a single price benchmark.