A major step has been taken towards transforming Pakistan’s power sector from a single-buyer model to a competitive electricity market, with the Power Division issuing a Request for Proposals (RFP) for the country’s first-ever electricity wheeling auction.

Under the Competitive Trading Bilateral Contract Market (CTBCM) mechanism, businesses and industrial consumers will be able to purchase electricity directly from power producers on a competitive basis.

The Power Division has invited proposals from interested entities for the auction, under which 800 megawatts of electricity are planned to be auctioned over the next five years. In the first phase, 400 MW of electricity will be offered for competitive procurement.

Federal Minister for Energy Sardar Awais Ahmad Khan Leghari, while announcing the launch of the auction process, congratulated Prime Minister Muhammad Shehbaz Sharif and the nation, describing the initiative as an important milestone in the country’s power sector.

He said the government currently purchased electricity under a centralized system and supplied it to consumers, adding that questions had often been raised regarding the terms and conditions governing electricity procurement.

“The government is practically moving out of electricity procurement from today,” the minister said.

He said under the new system, the government would neither have the right to sell electricity nor would it purchase electricity from power producers in the traditional manner.

“Those who generate electricity and those who consume it will be able to buy and sell electricity directly,” he added, stressing that the electricity trading mechanism would be based on transparency and competition.

The minister said the system would initially be implemented for industrial and large consumers, particularly those consuming more than one megawatt.

He said the competitive electricity market would gradually expand and, in the coming years, develop into a broader power market where consumers would have greater choice in purchasing electricity.

“Under this system, even an ordinary consumer will eventually be able to purchase electricity according to their choice,” he said.

The minister said the new mechanism would prevent the government from purchasing electricity and subsequently selling it to consumers at rates determined through the existing centralized arrangement.

He expressed the hope that availability of electricity at competitive rates would enable Pakistani industries to remain competitive in international markets and enhance their capacity to export products.

Referring to the power sector’s past procurement arrangements, the minister said the term Independent Power Producers (IPPs) had become controversial in public discourse, adding that the new competitive mechanism would bring greater transparency to electricity procurement and trading.

He said the government was fulfilling the commitments it had made regarding reforms in the power sector and congratulated the Prime Minister and the nation on the commencement of the new process.