Pakistan has decided to stop signing new state-led electricity procurement agreements as the government moves toward a more competitive power market. The decision also includes plans to auction 800 megawatts (MW) of electricity through competitive bidding.
The Cabinet Committee on Energy approved the move as part of wider electricity market reforms. Under the new system, electricity transactions will increasingly take place through the Competitive Trading Bilateral Contract Market (CTBCM).
800MW Electricity Auction Planned
The government has approved competitive bidding for an initial 800MW of electricity. The auction will be overseen by the Independent System and Market Operator (ISMO) under the Power Division.
The move is aimed at increasing competition in Pakistan’s electricity sector. Through electricity wheeling, buyers can purchase power from generators and use the national grid to deliver it to their facilities.
The 800MW auction is planned as an initial step. The government can consider increasing the amount of electricity offered through competitive arrangements after reviewing the pilot process.
Pakistan Moves Away From Single-Buyer Model
The reforms are designed to reduce reliance on the traditional single-buyer model. Under the emerging market structure, power generators and large consumers can enter competitive electricity supply arrangements.
NEPRA has also approved the framework for Pakistan’s first competitive wheeling auction. The process is intended to improve transparency and competition while addressing issues such as transmission limits and stranded costs.
For large electricity users, especially industrial consumers, the new system could provide another option for buying electricity directly from power producers. However, consumers using the national grid will still have to pay applicable transmission and wheeling charges.
What the New Power Market Means
The government is also linking electricity market reforms with wider energy planning. The Power Division says integrated planning will help coordinate energy demand, generation capacity and requirements across federal and provincial levels.
The latest decision does not mean that all existing electricity procurement arrangements will end immediately. Instead, it stops the signing of new procurement agreements and begins a gradual shift toward competitive electricity trading through auctions and market-based mechanisms.
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