Government Asks Regulator To Initiate Market Coupling For Power Exchanges

Pooling all buy and sell bids will help discovering uniform tariff across exchanges.

<div class="paragraphs"><p>(Source: Unsplash)</p></div>
(Source: Unsplash)

The Ministry of Power has directed the central electricity regulator to initiate the process of market coupling for all the power exchanges in the country, with the aim of having a uniform market price across all exchanges.

The decision was taken after several stakeholders approached the ministry, according to a June 2 letter from the ministry to the regulator. The ministry asked the Central Electricity Regulatory Authority to start the process of consultation and finalisation of the construction with exchanges, the letter said.

The ministry has asked the regulatory body to take the necessary action for expeditious implementation of the policy.

India has three power exchanges: India Energy Exchange, Hindustan Power Exchange, and Power Exchange India.

Currently, IEX is the most trusted platform for electricity spot price determination in India. However, the introduction of a full-fledged market coupler implies an independent third party will collate all buy and sell bids and derive a uniform market price across all exchanges.

"This potentially negates IEX’s ‘moat’, as other exchanges can eat into its market share over time. We reiterate our 'braveheart reduce' rating on the stock with a target price of Rs 127," Nuvama Securities said in a report.

"I am not sure of the purpose of this exercise since India already has a single grid and single price as IEX is the largest player with over 99% market share," said Rohit Bajaj, chief executive officer at Indian Energy Exchange. "Coupling can impact us if it is restricted to only the aggregation of buy and sell bids. But there are other factors too. We will have to wait and watch as to who will aggregate the bids and who will do the price discovery," he said.

From the process of consultation to final implementation, it may take two to three years, Bajaj said.

Shares of IEX were trading 7.44% down as compared to a 0.07% decline in the benchmark S&P BSE Sensex.