Pakistan prepares competitive electricity market with new operator

May 23, 2025 (MLN): An Independent System and Market Operator (ISMO) has been established to manage market operations in Pakistan’s power sector, with experienced professionals being appointed to ensure its effective functioning, the Minister of Power informed a visiting World Bank delegation.

The minister shared that Pakistan is preparing to introduce a competitive electricity market, moving away from the government acting as the sole purchaser of electricity.

Preparations for this transition are nearing completion, as per the press release issued.

Highlighting key financial reforms, the minister reported significant improvements in revenue recovery and emphasized the need to direct electricity subsidies only to those who genuinely require them.

He sought the World Bank’s support in implementing targeted subsidy mechanisms. Ms. Bjerde from the World Bank endorsed this approach, affirming the Bank’s commitment to assisting Pakistan’s power sector.

The minister also revealed that Pakistan currently has a surplus of about 7,000 megawatts of electricity.

He proposed supplying this excess power to industries at marginal rates to make it the cheapest industrial electricity in the region, stressing the importance of support from the World Bank and other partners to capitalize on this opportunity and boost industrial production.

Ms. Bjerde agreed, noting that utilizing surplus electricity at marginal cost is preferable to letting it go unused.

The minister explained that during winter, electricity was already supplied at lower rates without subsidies, and the aim is to extend this model year-round.

He added that the power sector is progressing toward implementing digital and smart systems from the feeder to the transformer level, underscoring the crucial role of World Bank support in this digital transformation.

The delegation was briefed on ongoing privatization efforts, with three electricity distribution companies currently being privatized and expected to complete the process by year-end.

Broader sector restructuring includes upgrades to procurement and tendering systems to meet international standards, improving transparency and merit, along with measures to speed up project completion.

The minister also highlighted the successful auctioning of old and non-operational government power plants and introduced the Power Planning and Monitoring Company (PPMC) as the technical backbone of the sector, staffed by leading industry experts involved in strategic planning and oversight.

World Bank Country Director Najy Benhassine praised the reforms and progress, announcing that an additional $55 million in funding is being processed in recognition of these achievements.

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