A Deep Dive into CERC's Draft Power Market (Amendment) Regulations, 2025

The Central Electricity Regulatory Commission (CERC) has proposed a significant amendment to the Power Market Regulations, 2021, with the release of the draft Power Market (First Amendment) Regulations, 2025. This amendment reflects the evolving contours of India’s electricity market, driven by increasing decentralization, decarbonization goals, and the growing role of Over-the-Counter (OTC) contracts and digital platforms. This blog dissects the key changes proposed, assesses their impact on various stakeholders, and identifies areas that require further clarity or attention.

I. Key Changes Proposed in the Draft Amendment

1. Expanded Scope of OTC Market Contracts

  - Inclusion of new types of contracts under Regulation 4:
  - Virtual Power Purchase Agreements (VPPAs)
  - Battery Energy Storage System (BESS) contracts
  - Banking of Power contracts
  - Capacity Contracts and RECs
  - Formal definition and operational structure for VPPAs

2. Introduction of VPPA Framework

  - Definition of Virtual Power Purchase Agreements as Non-Transferable Specific Delivery (NTSD) based OTC contracts
  - Explicit roles for Designated Consumers and Renewable Energy (RE) generators
  - Bilateral settlement of price difference between VPPA and market discovered price

3. Regulatory Alignment with GNA Framework

  - Replacing all references to the “Open Access Regulations” with “Connectivity and General Network Access (GNA) Regulations”
  - Synchronization with 2022 CERC GNA reforms

4. OTC Platform Regulation Strengthened

  - OTC Platforms now explicitly allowed to facilitate listed contracts without taking counterparty or credit risk
- Mandatory net worth of ₹35 crore at all times for OTC Platform operators
- Registration validity fixed at 10 years, with grandfathering for existing platforms

5. Expanded Regulatory Oversight

  - CERC empowered to inspect and audit both Power Exchanges and OTC Platforms
  - Provision for CERC to direct cancellation of membership in case of violations

II. Who Stands to Benefit?

- Renewable Energy Generators: Gain long-term revenue certainty through VPPAs.

- Designated Consumers (large industries, obligated entities): Flexible mechanisms to meet RPO and manage costs.

- OTC Platform Operators and Traders: Expanded product range and regulatory recognition.

- Battery Storage Operators: Monetization of capacity via formalized contracts.

- Trading Licensees: Enhanced brokerage opportunities in new OTC product segments.

III. Stakeholder-Wise Impact Analysis

a.   Renewable Energy Generators: Positive – VPPA inclusion facilitates off-take certainty and financial viability.

b.   Designated Consumers: Positive – Greater flexibility and choice in RE procurement.

c.   Power Exchanges: Neutral – Potential loss of volume to OTC but benefit from increased transaction    options.

d.   OTC Platform Operators: Mixed – Gains regulatory clarity but ₹35 Cr net worth may deter small players.

e.   State Load Dispatch Centers: Unclear – New responsibilities for scheduling VPPAs and BESS contracts may emerge.

f.       Small and New Entrants: Negative – Higher entry barriers due to minimum net worth requirement.

g.   Regulators: Positive – Enhanced oversight powers, clarity on new markets.

h.   General Consumers: Mixed – Indirect benefits via RE penetration but concerns about bilateral VPPA  enforcement.   

IV. Gaps and Missing Elements

·       Operational Guidelines for VPPAs – lack of clarity on scheduling, settlement, and SLDC coordination.

·       Standardization and Dispute Resolution – no templates or dispute mechanisms defined for VPPAs.

·       Interfacing with State Regulators and SLDCs – role in BESS and banking contracts needs clarification.

·       Consumer Protection – no safeguards for small buyers in OTC and VPPA transactions.

·       Market Power and Surveillance – surveillance for OTC Platforms not elaborated.

V. Legal Inconsistency

·   While the substitution of the term “Open Access Regulations” with “Connectivity and GNA Regulations” in the draft amendment reflects regulatory modernization, it is important to note that “Open Access” is a legal term embedded in the Electricity Act, 2003, whereas “General Network Access (GNA)” is a regulatory construct applicable primarily to inter-State transmission.

·   Open Access continues to govern intra-State transactions, especially in the context of distribution-connected consumers, open access by C&I users, and obligations handled by SLDCs. A blanket substitution may therefore unintentionally limit the scope or cause interpretative challenges where intra-State access is involved.

·   It is suggested that the amendment be revised to explicitly clarify that references to “Connectivity and GNA Regulations” pertain only to inter-State transmission, and that Open Access provisions under the Electricity Act and SERC regulations remain applicable for intra-State access

V. Conclusion: A Step in the Right Direction, with Caveats

The draft Power Market (First Amendment) Regulations, 2025, represent a well-considered move towards a more diversified, flexible, and resilient electricity market. By recognizing new products like VPPAs and BESS contracts and aligning regulatory references with GNA reforms, the CERC is future-proofing India's power sector. However, effective implementation will depend on granular operational guidelines, fair access to small players, and integration with state-level mechanisms.

As India’s energy market continues its transition towards flexibility, choice, and clean energy, the CERC’s regulatory evolution is both necessary and welcome. The need of the hour is to ensure that execution, monitoring, and market access principles match the ambition reflected in this amendment.