Electricity pricing reforms on the cards

The new electricity trading system will be launched in 2025 to reduce costs

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The government has announced plans to introduce a new electricity pricing system aimed at addressing issues within the power sector.

The new system will be launched later this year, according to a briefing provided by the Secretary of the Power Division to the Senate's Standing Committee on Power, Express News reported.

Currently, electricity is bought by the Central Power Purchasing Agency (CPPA) and sold to distribution companies (DISCOs), a system that has caused several operational challenges.

Under the new plan, a new body, the Independent System Market Operator (ISMO), will be established to regulate electricity trade. This body will be formed by merging the National Transmission and Dispatch Company (NTDC) and CPPA, which will streamline operations and reduce inefficiencies, said the Secretary of Power.

In a bid to overhaul the sector, the government will also privatise GENCOs (generation companies) and DISCOs, and the NTDC will be split into three separate companies.

The restructuring will aim to improve performance and modernise the transmission infrastructure.

The Secretary added that all future power projects will be planned with a focus on reducing costs, and any additional expenses will be borne by the federal or provincial governments, not the consumers.

The power sector's reforms also include the development of a 10-year transmission plan, which will be aligned with generation plans.

The Secretary mentioned that NTDC’s Board, led by Dr. Faiz Chaudhry, would work on the reforms, with recommendations expected by March 2025.

In addition, the Power Division is taking steps to reduce electricity tariffs, with significant reductions anticipated by June 2025.

The proposed reforms were met with some skepticism from lawmakers.

Senator Shibli Faraz raised concerns about NTDC's performance, noting that it has been operating without a permanent head for years. He also questioned the government’s ability to lower tariffs, considering the high cost of electricity.

Senator Mohammad Akram suggested that the government should address the increasing shift towards solar energy, which many citizens are adopting due to high electricity costs.

In response, the Secretary assured that the government is fully focused on resolving these challenges and that a reduction in electricity tariffs will be pursued in the coming months.

The government is also keen on improving efficiency and curbing system losses, which have contributed to the financial strain on the energy sector.

The new electricity market system is part of Pakistan’s broader strategy to tackle power sector issues, including inefficiencies, high costs, and the growing shift to renewable energy sources.

The government is optimistic that these reforms will lead to a more sustainable and cost-effective energy future for the country.