New wheeling mechanism allows eligible large consumers to buy electricity directly from power producers under Pakistan’s competitive power market reforms.
ISLAMABAD: The federal government has taken a major step towards transforming Pakistan’s electricity market by inviting Requests for Proposals (RFPs) for the country’s first electricity wheeling auction under the Competitive Trading Bilateral Contract Market (CTBCM).
Federal Minister for Energy Sardar Awais Ahmad Khan Leghari announced on Sunday that the government was effectively withdrawing from electricity purchases, paving the way for direct transactions between power producers and consumers.
“The government is practically exiting electricity purchases from today,” Leghari said during a televised address in Islamabad.
The development follows the National Electric Power Regulatory Authority (Nepra) approving uniform Use of System Charges (UoSC) for open-access bulk electricity consumers. The decision enables eligible consumers to select their electricity suppliers instead of relying solely on the existing centrally managed supply structure.
First phase to offer 400MW
According to Leghari, 400 megawatts (MW) of electricity will be offered in the first phase of the wheeling initiative. The government plans to auction a cumulative 800MW over the next five years.
The initial phase will target industrial and other large electricity consumers. Consumers requiring more than 1MW will be eligible to participate.
Under the wheeling mechanism, businesses and industries will be able to procure electricity directly from power producers on a competitive basis. The arrangement is intended to create a more market-oriented electricity trading environment.
“Nobody will have the right to sell electricity to the government, nor will the government be able to purchase it,” Leghari said.
Shift from centralised power procurement
The minister described the initiative as a major departure from Pakistan’s existing electricity procurement model, under which the government purchases power through a centralised system before supplying it to consumers.
Under the new framework, power producers and eligible consumers will be able to enter into bilateral transactions, with electricity transmitted through the existing grid infrastructure subject to applicable charges and regulations.
Leghari said the electricity market could gradually expand under the new arrangement, potentially allowing ordinary consumers to choose their electricity suppliers in the future.
“The government will no longer be able to purchase electricity and forcibly sell it to the public at its own rates,” he added.
Government expects lower electricity costs
Leghari said greater competition in electricity procurement could help reduce power costs for industry and improve the competitiveness of Pakistani businesses in international markets.
He argued that lower electricity costs could allow domestic industries to compete more effectively with foreign producers and support export growth.
The minister also highlighted longstanding concerns about the terms and conditions under which electricity has been purchased from independent power producers (IPPs).
“At present, the government purchases electricity through a centralised system and supplies it to consumers,” he said, adding that questions had persisted for years over the arrangements governing power procurement.
“The name of IPPs [independent power producers] has become notorious today,” Leghari remarked.
Leghari says decades-old reform commitment implemented
In a separate post on X, the energy minister said the government led by Prime Minister Shehbaz Sharif had effectively implemented a commitment that had remained under discussion for decades.
“Suppliers and consumers of power can now transact with each other. No more buying of power by the government, no more IPPs,” he wrote while sharing the public notice inviting RFPs for the initial 400MW wheeling auction.
The initiative represents a transition from a centrally controlled electricity procurement structure towards competitive bilateral power trading.
However, the effectiveness of the reform will depend on several factors, including transparency in the auction process, participation from power producers and large consumers, access to transmission infrastructure, reliable grid operations and the strength of the regulatory framework governing open-access electricity transactions.
The first 400MW auction will therefore serve as an important test of Pakistan’s efforts to establish a more competitive electricity market and reduce reliance on centralised power procurement.