Islamabad: Pakistan is transitioning from a single-buyer electricity procurement model to a competitive market system, as the government steps back from purchasing electricity directly. Federal Minister for Energy Awais Ahmad Khan Leghari announced the launch of the country’s first electricity wheeling auction on Sunday, signaling a significant shift in the power sector.
The Power Division has released a Request for Proposals (RFP) for the initial phase of the Competitive Trading Bilateral Contract Market (CTBCM), auctioning 400 megawatts of electricity. This is part of a broader plan approved by the National Electric Power Regulatory Authority (Nepra) to allocate a total of 800MW through competitive auctions over the next few years. The Independent System and Market Operator (ISMO) will oversee and manage the auction process.
Under the new framework, eligible industrial and large consumers will have the opportunity to purchase electricity directly from power producers through bilateral contracts. These consumers will use the national transmission and distribution network to wheel electricity to their facilities, bypassing the government as an intermediary.
At the auction launch, Minister Leghari commended Prime Minister Shehbaz Sharif and the nation for this milestone. He emphasized that the government, which previously acted as the sole purchaser and supplier of electricity, is now withdrawing from this role. The new market structure means neither power producers nor consumers are obligated to transact through the government.
The initial phase targets industrial and large consumers with electricity demands exceeding 1MW, enabling them to participate in the auction. This approach aims to gradually replace the long-standing single-buyer model with a market-driven system, offering consumers the freedom to select from competing power suppliers. The CTBCM framework ensures open, non-discriminatory access to the transmission network.
Nepra had earlier approved the regulatory framework and auction process this year, with further amendments ratified in September 2023. These regulatory decisions also established the basis for the competitive wheeling arrangement, including the applicable use-of-system charges.
The auction process allows for an aggregate wheeling capacity of 800MW to be allocated annually through competitive bidding, starting with the 400MW block in this first auction. This transition is designed to enhance competition in electricity procurement, granting industrial consumers access to alternative suppliers while boosting efficiency and transparency in the power market.
Leghari highlighted that access to more affordable electricity will help Pakistani industries stay competitive internationally and strengthen their export potential. He also indicated that a formal electricity market will gradually develop, with the possibility of extending competitive electricity purchasing to a wider consumer base in the future.
The Power Division described this shift as a major reform in the power sector. It confirmed that the government will cease entering new electricity procurement agreements, and all competitive bidding for the approved 800MW will be conducted transparently under ISMO’s supervision.
This transformation follows years of groundwork on the CTBCM framework. Nepra initially approved the market design in 2019 and has since worked on its implementation, including licensing ISMO and developing the wheeling auction framework.
The reform aims to evolve Pakistan’s electricity market from the existing single-buyer model towards a bilateral contracting system. This will allow generators and eligible consumers to negotiate electricity purchases directly while utilizing the existing grid infrastructure.
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