Abstract: Since the pilot run of the power spot market, the settlement mechanism of government- authorized contracts for differences (CFDs) has a great impact on the economic interests and market behavior of the market entities. This paper analyzes the connotation of electricity quantity and prices in the power spot market, the mechanism of hedging spot market price risks, and the problems faced by the settlement process. Then we discuss the premise of hedging spot market price risks with CFDs. Based on two principles, i.e., "ensuring fairness" and "hedging risks", this paper puts forward a settlement mechanism of "differentiation + prior determination". Finally, this paper sorts out the current settlement mechanisms for CFDs authorized by the governments in the provinces of Guangdong, Fujian, and Zhejiang. Comparing and analyzing the settlement mechanism proposed in this paper with the current settlement mechanisms being used in the above provinces, the fairness and practicality of the proposed settlement mechanism is evaluated.