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Pakistan to seek bids this month for first 400 MW competitive power auction
- Islamabad is moving from single-buyer power system to one allowing industrial consumers to buy electricity at negotiated rates
- Pakistani business associations urge government to reduce high power tariffs so exporters can compete with others worldwide
Pakistan is moving from a single-buyer electricity system to a Competitive Trading Bilateral Contract Market (CTBCM) that allowing industrial consumers to buy power directly from suppliers at negotiated rates.
The government will invite bids through a Request for Proposals (RFPs) within this month, officials at Pakistan’s energy ministry said, with the 400 MW auction expected to be held this year in the fourth quarter.
“ISMO will launch the Request for Proposals within September for conducting these auctions,” Zeeshan Khan, director corporate affairs and strategic communication at the state-owned Independent System and Market Operator (ISMO), told Arab News.
He said ISMO will complete the auction as per the timelines provided by Pakistan’s electricity regulator. He added that the National Electric Power Regulatory Authority (NEPRA) has approved the auction process and determined grid charges.
He did not specify when the auction would take place. However, a senior energy official said it was expected to be held in the fourth quarter of 2026.
“RFP is being published this month,” the official said on condition of anonymity as he was not authorized to speak to the press. “Then we will give two months’ time to investors to submit their proposals and bids.”
The government has capped the market demand of the auction at 800 MW, with 400 MW to be auctioned initially and 100 MW in each subsequent auction. The auctions will be open to competitive suppliers and captive generators using the grid to wheel power for their own use.
“These entities have to secure rights to wheel electricity by participating in the auction,” Khan said.
He said the auction will result in making power cheaper for industrial consumers.
“The players participating in the auctions must offer lower rates than the existing applicable regulated rates,” he explained. “Otherwise, no consumer will switch from the existing suppliers and sign contracts with these market players.”
Khan said he could not estimate the reduction in industrial tariffs, saying it would depend on generation portfolios proposed by bidders.
“It shall definitely be lower than the current tariffs,” he said.
‘BARE MINIMUM’ INVOLVEMENT
Khan said ISMO does not have any verified figure for the number of generators or industrial consumers that have formally committed to participating in the first 400 MW auction. Successful bidders will receive letters of award and must begin transactions within the timelines committed during the auction.
“The maximum time period for commencing transactions is three years from the auction date,” he said.
He said the auction will allow all producers to participate. Wind and solar projects, however, will be required to install co-located battery energy storage systems to improve the flexibility and reliability of renewable power.
Pakistan’s business community urged the government to reduce the power tariff so that they can compete with the competition worldwide.
Karachi Chamber of Commerce & Industry President Muhammad Rehan Hanif said industrial consumers were paying as much as 12.5 cents per kWh, while those in Bangladesh and other competing markets.
“Without bringing our industrial power tariff down to 9 cents, we cannot be competitive in the international market,” Hanif told Arab News.
All Pakistan Textile Mills Association Chairman Kamran Arshad also complained about high power tariffs, saying that textile owners in Pakistan’s competitor countries pay less.
“These legacy costs should be absorbed by the government rather than carried into the competitive market,” Arshad said.
He said at the current rates, the CTBCM may provide some relief but is unlikely to substantially close the competitiveness gap.
Muhammad Saad Ali, head of research at Lucky Investments Limited, described the competitive market as a long-term reform.
“The buyers and sellers will negotiate a price and ultimately the government’s involvement in the power sector, long-term, will be bare minimum,” Ali said.
