GRID India Seeks Fallback Mechanism, Ring-Fencing in CERC Market-Coupling Draft

Grid Controller of India Ltd (GRID India) has sought a fallback mechanism and institutional ring-fencing of market-coupling operations in its comments on draft regulations proposed by the Central Electricity Regulatory Commission (CERC), while broadly supporting the rollout of market coupling in India's power exchanges.

In a representation submitted on June 8 on the draft CERC (Power Market) (Second Amendment) Regulations, 2026, GRID India said the proposed designation of the state-owned grid operator as the sole Market Coupling Operator (MCO) would simplify implementation and enable faster rollout of market coupling, but could also create a single point of failure for electricity market clearing.

The draft regulations designate GRID India as the MCO responsible for unified price discovery across power exchanges.

While backing the proposal, GRID India said a regulatory fallback mechanism should be introduced to allow power exchanges to undertake price discovery in the event of a technical disruption at the MCO.

A single MCO design introduces a single point of failure. In case of any disruption, the entire market clearing function would be affected," it said, citing instances in Europe where technical issues led to partial decoupling of electricity markets.

GRID India also proposed that the market-coupling function be institutionally separated from its other operations. It suggested creating a dedicated cell within the organisation initially and, at a later stage, considering a wholly owned subsidiary to undertake MCO functions.

It said the regulations should retain provisions allowing CERC to notify the Market Coupling Operator through a regulatory order rather than permanently designating a specific entity in the regulations, which would provide flexibility if a separate subsidiary is created in future.

GRID India further recommended the creation of a Market Coupling Steering Committee comprising CERC, GRID India, power exchanges and external auditors or market monitors to oversee implementation, drawing on governance models used in European electricity markets.

It also called for a regulatory framework governing inter-exchange financial settlements, noting that payment schedules currently embedded in exchange bye-laws would need to be aligned with market-coupling processes.

In addition, GRID India urged CERC to mandate stakeholder consultation before finalising the Power Market Coupling Procedure, which will govern bid formats, operational timelines, encryption standards and settlement processes. It also sought provisions for parallel runs and transition arrangements before market coupling goes live.

On fee determination, GRID India said charges for MCO services should be notified by CERC through a regulatory order rather than being prescribed through the Power Market Coupling Procedure, arguing that fee-setting for regulatory functions requires a more formal legal framework.

Market coupling seeks to aggregate buy and sell bids from multiple power exchanges into a single market-clearing process, resulting in a uniform electricity price across exchanges and potentially improving market efficiency and liquidity.