The Power Division has issued a Request for Proposals for Pakistan’s first-ever electricity wheeling auction, a move aimed at shifting the power sector from a centralized single-buyer model toward competitive electricity trading.
Under the Competitive Trading Bilateral Contract Market (CTBCM) mechanism, industrial and large electricity consumers will be able to purchase power directly from electricity producers on a competitive basis.
The Power Division has invited proposals from interested entities for the auction, under which 800MW of electricity are planned to be auctioned over the next five years. The first phase will offer 400MW for competitive procurement.
Energy Minister Sardar Awais Ahmad Khan Leghari announced the launch of the auction process on Sunday and described it as a major milestone in Pakistan’s power-sector reforms. “The government is practically moving out of electricity procurement from today,” he said.
According to Leghari, the government currently purchases electricity through a centralized system and supplies it to consumers, but the new mechanism would fundamentally change the way electricity is bought and sold. Under the new system, the government would no longer purchase electricity from power producers and sell it to consumers through the traditional centralized arrangement, he said.
“Those who generate electricity and those who consume it will be able to buy and sell electricity directly,” he said, adding electricity trading would be based on transparency and competition.
Large consumers
The minister said the competitive electricity market would initially cover industrial and large consumers, particularly those with electricity consumption of more than 1MW. The system would gradually be expanded, with the government aiming to develop a broader competitive power market that would provide consumers with greater choice in selecting electricity suppliers, he said.
“Under this system, even an ordinary consumer will eventually be able to purchase electricity according to their choice,” he said.
The initiative aims to introduce greater competition into electricity procurement and reduce reliance on the existing centralized model in which the government purchases power and supplies it to consumers at rates determined through the prevailing system.
Leghari said the availability of electricity at competitive rates could help Pakistani industries reduce their energy costs, improve competitiveness in international markets and increase their capacity to export.
Reform of power procurement
The minister also referred to the longstanding public debate over Pakistan’s arrangements for purchasing electricity from independent power producers, or IPPs. He said the new competitive mechanism would introduce greater transparency into electricity procurement and trading, while representing a shift toward market-based arrangements.
Leghari said the government was implementing commitments made as part of its power-sector reform agenda and congratulated Prime Minister Muhammad Shehbaz Sharif and the nation on the launch of the auction process.
The first electricity wheeling auction is expected to mark an initial step in the transition toward a competitive electricity market in Pakistan, with the scope of direct power trading expected to expand over time.