ISLAMABAD, Sept. 3 (Lord Media): Experts from regulatory, research and industry circles have called for strengthening the foundational systems of power distribution companies (DISCOs) before expanding Pakistan’s Competitive Trading Bilateral Contracts Market (CTBCM), warning that market liberalization must be accompanied by core distribution reforms.
The recommendations were made during the Sustainable Development Policy Institute (SDPI)’s Network for Clean Energy Transition (NCET) launch of an Energy Regulatory Sandbox titled “Impacts of Competitive Auctions on DISCOs: Managing Consequences of Market Liberalization.”
Shah Jahan Mirza, former Managing Director of the Private Power and Infrastructure Board (PPIB), described CTBCM as one of the power sector’s most important issues, noting that the market was currently operating within a limited competitive framework.
Shah Jahan Mirza said the quantum being auctioned was relatively small and therefore likely to have a limited overall impact on the power sector. He identified privatization of DISCOs and establishment of a competitive market under CTBCM as the two main pillars of the transition.
Shah Jahan Mirza commended SDPI’s sandbox exercise and, citing global experience, said markets opened to competition had generally witnessed improvements in electricity pricing, quality and quantity.
He said the overarching objective should be to reduce overall system costs, which could be managed through income from wheeling charges and standard cost recovery from consumers migrating to the competitive market, ensuring that the remaining system did not face adverse impacts.
Shah Jahan Mirza said the 200-megawatt (MW) auction quantum would be drawn from the most expensive portion of power generation and called for the introduction of a competitive market. He added that already-installed solar systems were part of the existing system and should be better utilized rather than removed.
Shah Jahan Mirza described the initiative as a first step that would take time to mature and said the 200MW pilot project was unlikely to adversely affect the overall system.
Dr Khalid Waleed, Energy Economist and Research Fellow at SDPI, said solar and Battery Energy Storage System (BESS) adoption had gained significant momentum and played an important role in the sector’s transition.
Dr Khalid Waleed said privatization and market liberalization, including privatization of DISCOs and wheeling reforms, should form the basis for introducing competition. He proposed designating solar and BESS entities as Virtual Power Plants (VPPs), allowing them to sell electricity generated during the day to industrial consumers through CTBCM.
Dr Khalid Waleed cautioned that privatization alone would not deliver benefits for consumers, industry and the wider population unless innovation remained central to market liberalization.
Muhammad Ayub, former Chief Executive Officer of Khyber Pakhtunkhwa Transmission and Grid Company and a system-side technical expert, said basic operational infrastructure required for CTBCM, including functional Supervisory Control and Data Acquisition (SCADA) systems and real-time online data, remained unavailable at the DISCO level despite the reforms having been under development for years.
Muhammad Ayub said that despite roughly seven to eight years of work on the reforms, significant efficiency gains had not materialized. He argued that available resources should instead be directed toward core DISCO reforms.
The sandbox exercise, presented by SDPI researcher Muhammad Umer, examined the country’s first-ever wheeling auction of 200MW being launched by the Independent System Market Operator (ISMO) during Phase-I, with a net planned allocation of 800MW for up to five years.
The sandbox sought to measure the financial impact on DISCOs, evaluate different market scenarios, assess tariff implications and generate policy recommendations.
Based on the sandbox findings, Muhammad Umer proposed establishing a Virtual Power Plant-led revenue model for DISCOs targeting a defined consumer pool, gradually phasing in auction participation and creating a CTBCM surplus market mechanism under Scenario-II.
The approximate revenue gain under the proposed Scenario-II mechanism was estimated at Rs93 billion.
Muhammad Faisal Sharif, an Energy and Climate Practitioner at the University of Bath, said CTBCM provided an enabling environment through relevant authorities and institutions and that Pakistan was moving toward a competitive mode through the privatization of DISCOs.
Muhammad Faisal Sharif said the discussion should extend beyond DISCO revenue concerns to examine how marginalized communities and rural populations would benefit from the transition.
Waqas Haroon Moosa, Chairman of the Pakistan Solar Association (PSA), questioned the methodology used to calculate revenue losses, saying industrial base-rate multiplication did not account for other applicable charges.
Waqas Haroon Moosa suggested that excess electricity supply, particularly during load-shedding in specific areas, could instead be diverted to commercial consumers, potentially reducing the net revenue loss for DISCOs.
Amina Shahab, Research Associate at the Policy Research Institute for Equitable Development (PRIED), raised concerns about electricity supply reliability for industrialists and investors, stressing that uninterrupted power was essential for uninterrupted production.
Amina Shahab said many industrial consumers already relied on multiple energy sources, including captive solar, wind and thermal generation, often through informal arrangements. She questioned whether the initial 200MW CTBCM phase and subsequent expansion would succeed unless consumer readiness and the demand for reliable electricity were properly assessed.
Muhammad Umar Khan, Joint Director (Power and Infrastructure Procurement) at PPIB, discussed the treatment of demand assumptions in the sandbox and said that governments in countries moving toward electricity market liberalization had typically supported the transition through federal funding or subsidies.
Mashhood Urfi, Energy Transition Officer at Alternate Development Services (ADS), sought clarification on the weekend-charging assumption used in the sandbox study and asked which of the two scenarios presented was more economically viable from a purely economic perspective.
The session concluded with a question-and-answer segment in which participants discussed the implications of competitive auctions, DISCO revenues, consumer readiness, renewable energy integration and the broader transition toward a competitive electricity market. LORD
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