SC allows CERC to frame mkt-coupling regulations, dismisses IEX challenge

The apex court says the challenge is premature as regulations are yet to be notified, while allowing IEX to raise objections after the framework is finalised.

The Central Electricity Regulatory Commission’s (CERC’s) work on price discovery for electricity can continue for now with the Supreme Court on Monday dismissing the Indian Energy Exchange’s (IEX’s) challenge to the regulator’s market-coupling framework at this stage.

 

However, the court said that it had expressed no opinion on the merits of the dispute.

 

This allows the regulator to continue framing regulations.

 

A Bench of Justice P S Narasimha and Justice Alok Aradhe observed that the issue was premature because the regulatory framework governing market coupling was yet to be finalised.  The court said the IEX would be free to raise its objections once the regulations are notified.

   

The company’s share price at the BSE on Monday closed at ₹127.35, down 3.67 per cent as compared to the previous close.

 

The CERC told the court that the regulations governing market coupling would be notified in four to six weeks, paving the way for the implementation of the new framework for electricity trading.

 

The order comes as a setback for the IEX, which had sought judicial intervention against the CERC’s move on market coupling, a mechanism under which buy and sell orders from all power exchanges are pooled to discover a single market-clearing price instead of each exchange determining prices independently.

 

The CERC has argued that the system would improve price discovery, transparency and efficiency in electricity trading.

The IEX says the regulator’s approach could affect competition and market efficiency.

 

The company has argued that the existing exchange-based model has helped develop India’s power markets and market coupling is not warranted at the current stage.

 

The litigation stems from the CERC’s order directing the phased implementation of market coupling for the day-ahead market (the marketplace where electricity is bought and sold one day before it is supplied). The regulator had envisaged a “shadow pilot” before full implementation and proposed a rotational arrangement under which different power exchanges would act as the market-coupling operator.

 

The IEX challenged the decision before the Appellate Tribunal for Electricity (Aptel), arguing that the order was arbitrary and based on incorrect parameters. 

During the hearings earlier this year, Aptel made significant observations on the need for transparency and regulatory independence, remarking that the regulator’s processes must be, like Caesar’s wife, “above suspicion”.

 

It also noted the CERC’s assurance that market coupling would not be implemented until a proper regulatory framework was put in place.

 

Those observations had temporarily boosted investor sentiment although the tribunal did not finally decide the validity of the market-coupling policy itself.

 

With Monday’s order, the Supreme Court has effectively left the matter to the regulatory process for now.

 

India has three power exchanges. The IEX dominates electricity trading, and there are Power Exchange India Ltd (PXIL), and Hindustan Power Exchange (HPX).

 

These platforms facilitate buying and selling electricity across market segments such as the day-ahead and real-time markets.