ISLAMABAD: The federal government has announced that it is moving away from the traditional centralized electricity procurement system and has invited applications for Pakistan’s first electricity wheeling auction.
Speaking to the media in Islamabad, Federal Minister for Energy Sardar Awais Ahmad Khan Leghari said the government was, with effect from today, practically withdrawing from the electricity procurement system. Under the new arrangement, power producers and consumers will be able to buy and sell electricity directly.
He said 400 megawatts (MW) of electricity was being offered in the first phase, while the government planned to auction a total of 800 MW over the next five years.
Industries to Get Direct Access to Power Producers
According to Awais Leghari, the new system will allow businesses and industrial consumers to purchase electricity directly from power plants on a competitive basis.
Initially, the facility will be available to industrial and other large consumers. Those using more than 1 MW of electricity will be eligible to benefit from the system in the first phase.
The federal minister said that under the existing arrangement, the government purchases electricity and supplies it to consumers. However, questions have long been raised over the terms and conditions governing electricity procurement.
He added that the reputation of independent power producers (IPPs) had also become controversial and widely criticized in the public discourse.
Government to Exit Existing Electricity Procurement Model
Awais Leghari said the new system would bring an end to the government’s existing role in purchasing electricity for consumers. Under the proposed arrangement, power producers and consumers will be able to conduct transactions directly.
He said a formal electricity market would gradually develop in the coming years, eventually allowing ordinary consumers to choose their preferred electricity supplier.
According to the minister, the government will no longer rely on the existing model of purchasing electricity and selling it to consumers at government-determined rates.
Cheaper Electricity Could Boost Industrial Competitiveness
The federal energy minister said lower electricity prices would help Pakistani industries remain competitive in international markets.
He said access to electricity at competitive rates would enable domestic industries to compete more effectively and increase their ability to export products to global markets.
In a statement shared on social media, Awais Leghari said Prime Minister Shehbaz Sharif’s government had practically implemented a commitment made by previous governments decades ago, under which electricity suppliers and consumers would be able to conduct transactions directly.
The development comes days after the National Electric Power Regulatory Authority (NEPRA) approved uniform Use of System (UoS) charges for open-access bulk power consumers. Under the arrangement, eligible consumers will be allowed to choose their electricity supplier.
