CERC Proposes Market Coupling, Grid India to Act as Market Coupling Operator

The Central Electricity Regulatory Commission (CERC) has released a draft amendment to its Power Market Regulations, proposing a sweeping overhaul of electricity trading in India through the introduction of mandatory market coupling. The proposal is aimed at eliminating price fragmentation and strengthening efficiency in power price discovery across exchanges.

The draft Central Electricity Regulatory Commission (Power Market) (Second Amendment) Regulations, 2026 provides for compulsory market coupling in the Day-Ahead Market (DAM) and Real-Time Market (RTM). It designates Grid Controller of India Ltd. (Grid India) as the single Market Coupling Operator (MCO), effectively centralising the price discovery process that is currently carried out independently by multiple power exchanges.

Under the proposed framework, Grid India will establish a separate, ring-fenced division to perform its role as MCO. This entity will aggregate anonymous buy and sell bids from all power exchanges and run a unified price discovery algorithm. Until the mechanism is formally notified and operationalised, exchanges will continue to function under the existing system. Once implemented, however, their role will largely be limited to bid collection and facilitating settlement.

A key feature of the proposal is the introduction of a price discovery mechanism based on maximisation of total economic surplus, combining both buyer and seller surplus. In unconstrained transmission scenarios, a single uniform market clearing price will apply across all exchanges. In cases of congestion, the system will adopt market splitting, resulting in separate clearing prices for different regions depending on transmission constraints.

The amendments also outline a phased implementation approach. While market coupling will initially cover DAM and RTM segments, the Commission may extend it to other market segments such as term-ahead markets, green markets and ancillary services at a later stage through separate notifications.

Grid India has been tasked with preparing a detailed Power Market Coupling Procedure (PMCP) within six months of notification of the amendments. This procedure will define operational roles, timelines, bid formats, encryption protocols, the price discovery algorithm, as well as processes for scheduling, settlement and contingency handling. It will also specify the charges applicable to market participants.

Additionally, the draft introduces provisions extending existing regulatory requirements applicable to power exchanges to the MCO. These include obligations related to information disclosure, submission of business rules, maintenance of accounts and audit compliance, and periodic reporting to the Commission.

The proposal is expected to significantly reshape India’s power trading landscape. While market coupling is seen as a step toward improving liquidity and ensuring uniform price signals, it also places considerable operational responsibility on Grid India, traditionally a system operator. Power exchanges may see a reduced role in price discovery, requiring adjustments to their business models.

Stakeholders have been invited to submit comments and suggestions before the regulations are finalised, with the effective date to be notified separately following due process.