The potential transition of Pakistan’s power sector to a competitive wholesale electricity market under the Competitive Trading Bilateral Contract Market (CTBCM) regime is expected to bring major shifts in the way electricity is priced, distributed, and consumed.
While the operationalisation of CTBCM is touted as vital for competition, privatization, efficiency, and the sustainability of Pakistan’s economy, its real-world impact on vulnerable communities remains a pressing concern. Could this much-anticipated reform truly address the issues faced by millions of Pakistanis, especially those living in high-loss, underprivileged areas?
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Yasir Husain, an environmental consultant from Darya Lab, pointed out that the CTBCM could be a “way to decrease power prices through open market strategies,” adding that this reform could create a more competitive, consumer-centric environment.
Husain highlighted that under the CTBCM regime, wheeling—where electricity is transported from solar parks or wind farms to urban centers—offers an open and shut solution to many of the grid’s existing problems.
“High loss areas do not have energy equity and are poorer areas. Occasional power, less than twelve hours during heat waves crossing 40°C, harms human health,” he said.
Husain believes the operationalisation of the wholesale electricity market could bring innovation and lower prices, improving access to electricity for these communities.
The current situation in Pakistan’s power sector has disproportionately impacted vulnerable communities, particularly in rural or less-developed areas, where power outages are frequent, and electricity access is limited.
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With summer temperatures frequently rising above 40°C, the lack of reliable electricity exacerbates health risks.
For such communities, the CTBCM’s promise of reducing electricity costs and offering better service quality is significant. By opening up the market and allowing different energy providers to compete, the CTBCM aims to increase efficiency, reduce power outages, and lower costs. Under this model, consumers could have more options to choose energy suppliers based on price and service quality, similar to how the telecom market functions. Husain emphasises that this would “allow whole areas to choose their utility provider,” and create a more equitable energy landscape.
Under the current structure, areas with high energy losses are subject to frequent load shedding, as they do not recover costs through electricity bills due to non-payment and theft. The CTBCM regime must, when implemented, focus on fair market competition and pricing, must ensure that these regions are not left behind.
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For vulnerable communities, the operationalisation of CTBCM must be accompanied by targeted interventions.
These could include incentives for private investment in modern infrastructure, smart grid technologies to monitor and reduce losses, and differential tariffs that adjust for regional disparities in service quality.
Without these measures, there is a risk that low-income areas could be further marginalised if they cannot afford to pay for electricity in a newly privatised market.
The introduction of auctions for power procurement by distribution companies (DISCOs) under the CTBCM could also help drive down electricity prices. By enabling open access to the wholesale electricity market, this approach allows energy producers to compete for contracts, fostering a more competitive environment. Husain noted that “tailored solutions” from green power companies could bring further relief, especially for those advocating for a more sustainable energy future.
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CTBCM’s open market model is poised to allow companies to transport electricity from renewable sources like solar parks and wind farms directly to consumers, thereby reducing the strain on the national grid.
For high-loss areas, this could be transformative, offering a chance for more reliable, renewable energy at a lower cost. Additionally, by fostering competition, the CTBCM could incentivise service providers to improve their offerings and reduce costs, ultimately benefiting consumers.
Why so long for Pakistan to recognise electricity competitive markets?
The global shift from vertically integrated utilities (VIUs) to competitive markets began in the 1980s, aiming to improve efficiency, reduce costs, and enhance service quality. However, Pakistan’s power sector has faced significant challenges, including government-controlled monopolies, political influence, and slow reform implementation, which have hindered competition and innovation.
The transition from VIUs to an unbundled and corporatized structure has been slow, with the power sector still dominated by government entities. This lack of competition has led to inefficiencies, bureaucratic delays, and poor service quality. Regulatory bodies in Pakistan also face challenges, as they often lack the independence and capacity to enforce transparent regulations and ensure fair competition.
Recent efforts under the CTBCM regime have focused on reforming the legal, policy, regulatory, and institutional frameworks to promote competition, protect consumer rights, and attract private investment. Key reforms include the unbundling of distribution companies, the separation of system and market operations, and the privatization of generation and distribution entities. These changes aim to create a more efficient, liquid, and stable electricity market, encouraging transparency and competition.
The adoption of competitive bidding, bilateral contracts, and open access to electricity markets is essential to fostering a competitive environment. Empowering consumers to choose their electricity suppliers based on price and service quality is expected to improve market efficiency.
Learning from global best practices, such as those in the UK, Australia, and India, can provide valuable insights for Pakistan’s power sector transformation. The transition from a monopolistic and inefficient system to a competitive, consumer-centric market is essential for the sector’s financial viability and sustainability.
The government and regulatory bodies must take swift action to ensure that the transition to a competitive wholesale electricity market does not exacerbate existing inequalities but instead offers a lifeline to those who need it most. As Husain aptly concluded, “The electricity market will bring innovation, low prices, and easier access to electricity for all.”
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