Page 46 - CMA Journal (Sep-Oct 2025)

Focus Section

Pakistan’s Power Sector Deregulation:

How CTBCM is Transforming the Market

Due to its unique characteristics and economies of scale, Central Power Purchas-
the power sector across the globe has traditionally ing Agency (CPPA-G)
prospered under the monopoly model. Generating was established as a
stations ranging in size from a few kilowatts to several separate entity and
gigawatts, along with thousands of kilometres of given the mandate to
transmission lines, have been built under this model. develop the competi-
There were also significant technological advances under tive wholesale electrici-
this model that enabled power generation in ty market-the Competi-
resource-rich, far-flung areas and its transmission to load tive Trading Bilateral
centres near metropolitans in bulk quantities. Contract Market (CTBCM) Abrar Hussain
- in Pakistan. CPPA-G,
However, in the 1970s, economists started to argue that Director, Market Design
this model had run its course, and with technological with the help of and Simulations at the
advancements, it was possible to introduce competition in international consul- Independent System and
certain segments of the electricity supply chain. It was tants provided by the Market Operator (ISMO)
considered appropriate that transmission and distribution Asian Development
(the transportation part) remain a natural monopoly; Bank (ADB), developed
however, competition could be introduced in generation the market design and allied framework, which were
as well as in the retail supply side. Chile was the first approved by NEPRA for a trial run in 2022. CPPA-G has
country to introduce these reforms in 1982, followed by completed the trial run and submitted the final report to
the UK and other countries, and now we see deregulated NEPRA. NEPRA is now in the final stages of granting approv-
electricity markets in many regions across the globe. al for the start of the commercial operations of the CTBCM.
Similar to other countries, the power sector in Pakistan Inside CTBCM
was also developed under the monopoly model, where
the Water and Power Development Authority (WAPDA) The CTBCM has been designed considering the local
was responsible for managing all segments of the power peculiarities of the power sector of Pakistan, such as the
sector in the country except in the city of Karachi, where long-term Power Purchase Agreements (PPAs), current
the Karachi Electricity Supply Company (KESC) managed demand-supply balance, and the payment culture. It has
all segments of electricity supply. In order to attract been tailored to suit the existing conditions and has all
private investment, Pakistan also decided to deregulate the ingredients to evolve towards more advanced stages
its power sector in 1992 (WAPDA Restructuring Plan through consistent improvements over time. The CTBCM
1992) to establish a competitive electricity market where offers the following at the start:
the private sector could buy and sell electricity in a
competitive environment. • Any Bulk Power Consumer (having a sanctioned load
The first power policy was issued by the government in of at least one MW) can purchase electricity from a
1994 to enable WAPDA to purchase power from private supplier other than the host Distribution Company
generating plants (also called Independent Power (its current and only supplier) at an agreed rate and
Producers or IPPs). The National Electric Power other terms and conditions. This new supplier has to
Regulatory Authority (NEPRA) was established in 1997 as pay the Use of System Charge over and above its
an independent regulator for the deregulated sector. generation or purchase cost for injection and
WAPDA was restructured by unbundling its generation, withdrawal from the transmission and distribution
transmission, distribution, and supply roles. After network. This opens new avenues for industries to
restructuring, WAPDA was assigned only the role of hydel source their electricity at their own choice, i.e., they
generation, while other functions were assigned to can source from specific technologies (meeting
separate corporate entities.
green energy targets), stabilise their energy price by
NEPRA mandated the National Transmission and Despatch entering into fixed price contracts with suppliers, and
Company (NTDC), currently the National Grid Company, agree on different packages with them. You can
while issuing its transmission license, to establish a compet- assume an analogy with the telecom sector, where
itive wholesale market in Pakistan by 2004. However, these different telecom operators compete with one
efforts could not be materialized at that time. The competi- another, and customers are free to choose the
tive market development reform was reignited when the packages that suit them.

44 ICMA’s Chartered Management Accountant, Sep-Oct 2025