Competitive electricity market

The prime minister's plan to introduce a competitive electricity market may seem like a win-win at first glance, but even a cursory look at countries where such systems are already in place reveals that the answer is more nuanced.

While a perfectly competitive electricity market would indeed be in the best interest of consumers, producers and distributors, the fact is that perfect competition is an illusion, and in practice, competitive electricity markets, like any other market, require oversight and potential intervention to keep companies in check.

One notable recent failure was in the US state of Texas, where a 2021 winter storm knocked out party of the power grid, causing automated systems to 'sell' power to other customers for rates 350 times as high as normal.

Companies tried to force consumers to pay until the government was forced to intervene. That said, mismanagement and corruption are so rife in Pakistan's power sector that a free market probably couldn't do much worse.

With a proper regulatory framework in place, a competitive power market would likely reduce consumer prices while also allowing consumers the opportunity to choose the supplier, rate plan and visit frequency that suits them best.

Unfortunately, the local market's infrastructure and regulatory framework are far from ready to support a competitive electricity landscape. The risk of further destabilising an already fragile power system is substantial, particularly when the country struggles with regular power outages and a lack of reliable supply.

Competitive markets can also put the environment at risk, as many people will opt for the lowest-priced option, regardless of its impact on the environment. While people in richer countries can choose to buy higher-priced power from green sources, here, even relatively wealthy people are struggling with their wage and power bills.

On the other hand, in government-managed systems, planners can aim to balance the sources of electricity to ensure that consumers get competitive prices, while producers continue to make profits.