CERC Weighs Cut In Power Exchange Transaction Fees Ahead Of Market Coupling

The Central Electricity Regulatory Commission is considering rationalising transaction fees charged by power trading exchanges as it moves ahead with market coupling, a reform that could lower electricity procurement costs over time, officials said.

The review comes as the regulator prepares to introduce market coupling, a change aimed at improving efficiency, deepening liquidity and enabling price convergence across power exchanges.

Market coupling, approved by the commission in July after more than two years of deliberations, is set to be rolled out in phases, beginning with the day-ahead market from January 2026.

Under the mechanism, buy and sell bids across all exchanges will be pooled to discover a single market-clearing price, replacing the current system where prices vary across platforms.

An official said the regulator finalised a staff paper in December 2025 titled “Review of Transaction Fee charged by the Power Exchanges.” The review is examining whether the current transaction fee framework, capped at two paise per unit, remains appropriate in a market where trading volumes have risen sharply and price discovery will become unified.

The official said proposals under discussion include fixing a transaction fee of 1.5 paise per unit for most trading segments. Another option being examined is reducing the fee to 1.25 paise per unit for term-ahead market contracts, which have longer tenures and lower operational intensity.

Under the existing framework, exchanges typically charge fees close to the prescribed ceiling.

India’s exchange-based electricity market has expanded sharply over the past decade, with traded volumes rising more than 16 times since 2009-10. Total electricity traded on exchanges crossed 120 billion units in 2023-24.

While the day-ahead market earlier accounted for most traded volumes, real-time, intra-day and term-ahead segments now form a growing share of exchange-based trading.

Industry participants expect market coupling to narrow price differences across exchanges, improve generation capacity utilisation and allow buyers to procure power at more efficient rates.

“Since bids are aggregated across all exchanges, prices are expected to converge and soften to some extent, benefiting distribution companies and large consumers,” an industry expert said.

Indian Energy Exchange currently accounts for nearly 90% of exchange-based power trading volumes. Power Exchange India Ltd and Hindustan Power Exchange Ltd make up the remainder.

Under the approved market coupling framework, all three exchanges will serve as Market Coupling Operators on a rotational basis, with Grid-India acting as a backup and audit operator.

Officials said transaction fee design will take on greater importance once exchanges no longer compete on price discovery. Transaction fees account for more than 95% of revenues for established power exchanges.

The official said discussions remain at an early stage and any decision on transaction fees will follow stakeholder consultations and align with the broader objective of improving efficiency, transparency and affordability in India’s power markets.Power regulator Central Electricity Regulatory Commission is considering rationalising transaction fees on power trading exchanges, which aims to potentially lower electricity prices as the power sector gears up for market coupling.

The development came as the power regulator moves ahead with market coupling, a reform expected to improve efficiency, deepen liquidity and promote price convergence across exchanges.

The move could lead to a reduction in the overall cost of power for buyers over a period of time.

Market coupling, approved by the Central Electricity Regulatory Commission in July this year after more than two years of deliberations, is proposed to be introduced in a phased manner, beginning with the day-ahead market (DAM) from January 2026.

Under the mechanism, buy and sell bids across all power exchanges will be aggregated to discover a single market-clearing price, replacing the current system of multiple prices across platforms.

An official said CERC has firmed up a staff paper on 'Review of Transaction Fee charged by the Power Exchanges' in December 2025.

The official, on the condition of anonymity, said the regulator is examining whether the current transaction fee framework, capped at 2 paise per unit, remains appropriate in a market that has seen a sharp rise in volumes and is moving towards a unified price discovery mechanism.

There have been suggestions for a fixed transaction fee of 1.5 paise per unit for most trading segments.

Currently, as per the existing structure, exchanges typically charge close to the ceiling.

Another suggestion under consideration is to lower the transaction fee to 1.25 paise per unit for term-ahead market (TAM) contracts, given the longer tenure and relatively lower operational intensity of such trades.

India's exchange-based power market has expanded significantly over the past decade, with electricity traded on exchanges rising over 16 times since 2009-10 and total traded volumes crossing 120 billion units in 2023-24.

While the day-ahead market once accounted for nearly the entire traded volume, real-time, intra-day and term-ahead segments now form a growing share.

According to industry experts, market coupling is expected to reduce price differences across exchanges, improve utilisation of generation capacity and enable buyers to access power at more efficient rates.

'Since bids are aggregated across all exchanges, prices are expected to converge and soften to some extent, benefiting distribution companies and large consumers and eventually end-users,' an expert opined.

Indian Energy Exchange currently accounts for nearly 90 per cent of exchange-based power trading volumes, while Power Exchange India Ltd (PXIL) and Hindustan Power Exchange Ltd (HPX) make up the rest.

Under the approved framework, all three exchanges will act as Market Coupling Operators on a rotational basis, with Grid-India serving as a backup and audit operator to ensure system integrity.

Officials noted that transaction fee design will become increasingly important once exchanges stop competing on price discovery.

With transaction fees contributing over 95 per cent of revenues for established exchanges, any recalibration is expected to have a material impact on the sector.

The official stated that discussions on transaction fees are at a preliminary stage and any decision would follow stakeholder consultations, and align with the broader objective of improving efficiency, transparency and affordability in India's power markets.