BL Explainer: How CERC’s market coupling decision impacts IEX

With price discovery no longer in IEX’s hands, revenues and market share may decline, and competition could drive transaction charges lower.

Shares of Indian Energy Exchange (IEX) crashed as much as 30 per cent to hit a low of ₹131.50 on the NSE, as the Central Electricity Regulatory Commission (CERC) announced on Wednesday that it had decided to implement market coupling in a phased manner for electricity trading. This is expected to significantly impact the revenue and profitability of the energy exchange.

What does the CERC order say?

There are two types of trading on power exchanges: real-time (RTM) and day-ahead market (DAM). The CERC order stated that, from January 2026, Grid-India will consolidate energy prices on all power trading platforms, and a single price will be disseminated. This is called the coupling of the day-ahead market. “This arrangement would facilitate an efficient functioning of the power exchanges and also help instill faith of the market participants in the power exchange operations,” says the order.

A similar coupling of the real-time market is expected to occur at a later date.

How will market coupling work?

Currently, electricity is traded on the market leader IEX, Power Exchange of India and Hindustan Power Exchange of India. IEX has an approximately 85 per cent share of the market overall, and a 100 per cent share in key segments, such as DAM and RTM. Today, sellers and buyers of electricity bid on these exchanges, and therefore, the price discovery on each of the three is different.

Under ‘market coupling’, there will be a single market-cleared price common to all three exchanges. This means that the three exchanges will merely collect bids and submit them to the appointed agency to determine the common price. This is similar to an agency determining a common price for Uber, Ola, Blusmart, etc. Essentially, this means that the dominant exchange (IEX) will lose its mojo, because, unlike now, under market coupling, there would be no particular reason for a bidder to choose IEX over the other two exchanges.

How is the Day-Ahead Market (DAM) different?

The Day-Ahead Market is where electricity is bought and sold one day in advance. Integrated Day Ahead Market (I-DAM) of IEX is a physical electricity trading market which allows market participants to buy and sell electricity for the next day. Power generators offer to sell electricity at a set price while buyers place bids to buy.

The prices and quantity of electricity to be traded are determined through a double-sided closed auction bidding process. The exchange (such as IEX) matches buyers and sellers through an auction.

How will the CERC order impact IEX?

In FY25, DAM and RTM contributed approximately 50 per cent and 30 per cent, respectively, to IEX’s turnover. A central algorithm, likely managed by the Grid Controller of India, will match bids and allocate trades, as individuals do now.

Therefore, IEX will lose control over price discovery, as other exchanges, such as PXIL and HPX, will gain access to the same pricing. Market coupling can therefore hit the revenues of IEX. According to experts, transaction charges will also come down due to increased competition. If other participants offer better transaction fees, traders may shift to them.

According to experts, market coupling if implemented, could lead to IEX’s market share declining from 84 per cent currently to 70 per cent by the financial year 2027.

Published on July 25, 2025