Pak govt moves to phase out state-led power purchases

Islamabad, Dec 25 (PTI) Pakistan government approved a pilot electricity auction to allow power to be bought and sold through competition, a first step leading towards market force to determine electricity prices.

Currently the government sets the price of power, which leads to discontentment among the masses due to alleged inefficiency and corruption in the power sector.

The Pakistan Muslin League-Nawaz led government had long indicated to leave the issue of electricity price to be decided by the primary force of demand and supply.

In this regard, the Cabinet Committee on Energy on Wednesday approved framework guidelines for a “wheeling” auction of 800-megawatt of electricity under the Competitive Trading Bilateral Contract Model (CTBCM), reported Dawn.

Wheeling refers to the use of the national electricity grid to deliver power from a generator to a buyer. Big factories or companies may buy electricity directly from a producer, but they still need the grid wires to get it. The fee they pay for using those wires is called wheeling and grid charges.

The meeting, presided over by Prime Minister Shehbaz Sharif, also decided to end future procurement of power generation capacity in the public sector and constituted an 18-member steering committee of federal and provincial bureaucrats to lead integrated energy planning (IEP) — a push to bring electricity, oil, gas and other energy planning under a single coordinated national approach.

Under the framework guidelines, 800MW of generation capacity would be sold through a competitive auction for five years. The quantum would gradually increase after the initial trial, subject to government approval.

The auction is being developed under CTBCM, a system in which power producers and buyers deal directly with each other, rather than the government acting as the main middleman. In plain words, electricity is bought and sold like a market, not fully controlled by the government.

The National Electric Power Regulatory Authority (Nepra) would determine the wheeling and grid charges for bulk power consumers upon a uniform petition to be filed by the distribution companies under the guidance of the power division.

An indicative wheeling charge of about Rs12.55 per unit may come into force, although industrial consumers are contesting it as too high and rendering their products uncompetitive.

The guidelines require the Independent System and Market Operator (ISMO) — a new entity created under the Power Division — to issue the auction process with Nepra’s approval.

ISMO will issue an auction calendar and detailed procedures. The framework does not allow a minimum or maximum limit on bid prices (no “cap” or “floor”), and the bid price is to remain fixed for one year.

The guidelines also delineate the roles and responsibilities for the implementing agencies, including Nepra, ISMO and auction participants, and govern the entire structure of the CTBCM.

Under the timelines agreed with the IMF, approval of these guidelines for auction was targeted for December and approval of uniform wheeling charges by Nepra in January 2026.

An official statement said the resident committee of the top civil-military forum — the Special Investment Facilitation Council — had decided to have an integrated energy plan through federal and provincial coordination.

This encompasses authorisation for the CTBCM framework pertaining to electricity auctions, it said, adding that “consistent with the government’s pledges, no further electricity procurement agreements shall be entered into”, formally disengaging the government from electricity procurement activities, reported Dawn. PTI SH AMS