The Central Electricity Regulatory Commission (CERC) recently released the draft Power Market (First Amendment) Regulations, 2025, marking a significant step towards advancing India’s electricity market design. Building on the foundation of the Power Market Regulations, 2021, the proposed amendment seeks to enhance market depth, improve operational flexibility, and enable more efficient and intelligent power trading.
The key focus areas under the draft amendment include the formalisation of over-the-counter (OTC) platforms, the introduction of emerging market instruments such as virtual power purchase agreements (VPPAs) and battery energy storage system (BESS) contracts, and the alignment of regulatory provisions with the Connectivity and General Network Access (GNA) framework.
Introduction of VPPA
The formal introduction and regulatory recognition of VPPAs is one of the most notable updates in the draft amendment. Defined under a newly inserted clause in the amendment, a VPPA is a non-transferable, specific-delivery-based OTC contract executed between a consumer or designated consumer and a renewable energy generator. CERC has also proposed that the implementation and execution of VPPAs will follow specific guidelines, to be notified separately, ensuring standardisation and regulatory oversight.
VPPAs represent a significant shift in how renewable energy procurement can be structured in India, offering a financial contracting mechanism rather than traditional physical power delivery.
Under this arrangement, the renewable energy generator sells electricity through the power exchange or other approved market mechanisms, while the consumer guarantees payment of a pre-agreed VPPA price for the duration of the contract. The financial settlement is based on the difference between the VPPA price and the prevailing market price, allowing the buyer to hedge against market volatility without taking the physical delivery of power.
Additions to OTC market instruments
The 2025 amendment expands the scope of contracts permitted under the OTC market, reflecting the evolving needs of market participants and the increasing complexity of electricity trading. Regulation 4(2) of the Principal Regulations has been revised to include a broader set of instruments that can be transacted in the OTC space. In addition to existing delivery-based energy contracts and renewable energy certificates, the amendment incorporates capacity contracts, VPPAs, BESS contracts and banking of power as eligible OTC products.
This expanded portfolio is intended to facilitate more tailored and long-term energy contracting options outside the conventional exchange framework. By enabling flexible instruments that align with emerging business models, such as storage-backed energy trading and bilateral banking arrangements, the amendment enhances the OTC market’s relevance for both conventional and renewable energy stakeholders.
Strengthening of the OTC market framework
A notable change is the expanded definition of OTC platforms, which are now formally recognised not just as information exchange interfaces but also as facilitators of actual electricity transactions between buyers and sellers. The amendment also clarifies the role of OTC platform members, bringing them within the purview of the regulatory framework applied to power market participants.
Further, the price discovery mechanism in the OTC market has been broadened to include transactions conducted through mutual agreements, trading licensees, competitive bidding, OTC platforms or as determined by the appropriate commission, thereby ensuring flexibility while maintaining regulatory oversight. Additionally, the amendment mandates that the scheduling of OTC contracts must align with the Connectivity and GNA Regulations and the Grid Code, ensuring consistency with national transmission planning norms.
To reinforce financial robustness, the amendment prescribes a minimum net worth requirement of Rs 350 million for OTC platform operators, with a compliance timeline of 12 months for existing platforms. These updates collectively aim to build a credible, transparent and scalable OTC market structure that can support a wider range of energy contracts and participants, particularly in the context of India’s expanding renewable energy ecosystem.
Governance, oversight and compliance measures
To ensure greater accountability and market integrity, the amendment strengthens the regulatory oversight of both OTC platforms and power exchanges. CERC is now explicitly empowered to undertake inspections, audits and inquiries of these entities, either through its own officers or via appointed third-party agencies. This enhanced supervisory authority allows CERC to proactively monitor market conduct, operational adherence and financial soundness.
All platform operators, directors and employees are mandated to fully cooperate during such regulatory assessments, ensuring transparency and timely compliance. Moreover, to deter misconduct and enforce discipline, the amendment authorises CERC to direct the cancellation of membership of any participant found to be in violation of the regulations, whether on a power exchange or an OTC platform. These provisions are a critical step towards establishing a robust compliance culture within the power market ecosystem and safeguarding stakeholder interests.
Shifting to Connectivity and GNA framework
A pivotal structural change introduced in the amendment is the replacement of references to the Open Access Regulations with the more contemporary Connectivity and GNA Regulations, 2022. This shift reflects the evolving transmission access paradigm in India, moving away from buyer-linked, contract-specific access towards a more flexible, region-agnostic and non-discriminatory access framework. By aligning power market regulations with the GNA framework, the amendment ensures greater regulatory consistency, operational clarity and integration with national transmission planning. This transition also facilitates easier market participation, particularly for renewable energy developers and large consumers, by streamlining scheduling, access approvals and transaction settlement across both exchange-based and OTC markets.
Other key amendments
In addition to the major structural and market-driven reforms, the amendment also introduces several important definitional and procedural updates that enhance regulatory clarity. The definition of “contingency contracts” has been revised to explicitly state that such transactions occur on Day T after the finalisation of day-ahead trades, with delivery scheduled for T+1, thereby bringing uniformity in contract interpretation and operational timelines. The inclusion of the term “designated consumer”, as defined under the Energy Conservation Act, 2001, is another notable addition, paving the way for more targeted instruments such as VPPAs to be aligned with national energy efficiency and decarbonisation mandates.
Furthermore, the definition of “market” has been updated to explicitly include OTC platforms, underscoring their legitimacy and strategic importance in India’s evolving electricity trading ecosystem. In line with this, entities transacting on these platforms will now be formally recognised as “members” under CERC regulations, ensuring that they are subject to the same governance, eligibility and compliance requirements as participants on power exchanges. These refinements contribute to a more inclusive and coherent regulatory framework, reinforcing the integration of bilateral and decentralised trading mechanisms within the mainstream power market.
The way forward
The draft Power Market (First Amendment) Regulations, 2025, mark a progressive step by the CERC to modernise India’s electricity market in line with evolving sectoral needs. By formally introducing instruments such as VPPAs and BESS contracts, the amendments are set to accelerate renewable energy adoption and enhance market flexibility, supporting India’s ambitious target of achieving 500 GW of non-fossil fuel capacity by 2030. These financial instruments allow large consumers to meet their sustainability goals without being tied to the physical delivery of electricity, enabling more efficient and flexible procurement of clean energy.
Further, the strengthening of OTC platforms and the broadening of contract structures are expected to significantly improve market efficiency by enhancing transparency, enabling tailored transactions and attracting greater stakeholder participation. The formal recognition of BESS contracts as tradable instruments is particularly critical in bolstering grid stability, as energy storage plays a key role in managing peak loads and mitigating the variability inherent in renewable energy generation.
Collectively, these reforms lay the foundation for a resilient, transparent and dynamic power market. To fully harness their potential, the focus must now shift towards creating enabling implementation frameworks, building institutional capacity and fostering seamless stakeholder coordination. With effective execution, these forward-looking reforms will not only enhance operational efficiency and market depth but also contribute meaningfully to India’s long-term decarbonisation and energy security objectives.
Aastha Sharma