Page 47 - CMA Journal (Sep-Oct 2025)

Focus Section

• The existing Distribution Companies (in their roles as The Balanced Approach
Suppliers of Last Resort) will no longer be procuring
through the CPPA-G, but they will follow a rigorous Recently, the government has taken a serious initiative to
process to procure for themselves and ensure address this long-standing issue and to operationalize
least-cost procurements for their customers. They the CTBCM in a responsible manner, meaning that no
can’t procure from any generation plant which is not stakeholder is unduly burdened through these reforms. A
techno-commercial analysis was performed through the
selected by the Indicative Generation Capacity IGCEP to ascertain a quantum that has minimal impact on
Expansion Plan (IGCEP) on the least-cost criteria. This the overall system, and the analysis showed that this
is a paradigm shift in how the power sector was quantum stands at 800 MW of demand.
being planned historically, which caused the
boom-and-bust cycles. Once the legacy burden is Based on this finding, the government initiated the
over, the sector will expand in a streamlined manner necessary amendments to the National Electricity Plan
where every activity will be coordinated to ensure and the Supplier Rules 2023 to pave the way for the
that there are neither surpluses nor deficits. smooth operationalization of the market. In order to
ensure transparency and fairness, it has been decided
• Any generating plant can offer its electricity to the that this quantum of demand will be allocated through
market at a rate cheaper than the existing generation multiple auctions over a period of five years.
plants and will get priority in the economic dispatch.
This will reduce the overall generation cost for the The Future
entire grid. This transaction is called merchant The launch of the CTBCM will sow the seeds for a
generation. well-planned, transparent, and competitive electricity
market in Pakistan. While some may argue that the initial
The Bottleneck
design is very simple, based on bilateral contracts
In 2015, there were acute power shortages in the country, without any revolutionary measures to solve the issues of
and the government was desperate to bridge the gap surplus capacity, rising prices, and T&D issues, one should
between demand and supply. The government took two keep in mind that revolutions are seldom sustainable,
decisions during this era. On one hand, it decided to while evolutions always are. Through gradual and
liberalize the electricity market by having a competitive incremental improvements, the CTBCM can achieve its
wholesale electricity market in the country, and on the ultimate goal of bringing choice and convenience to the
doorstep of electricity customers.
other hand, it embarked upon an ambitious plan to
enhance the generation capacity by procuring through In the short run, the industry, especially exporters, can
the single buyer model. As the China Pakistan Economic use the CTBCM to meet their green energy compliance
Corridor (CPEC) was in full swing during this era, the requirements, while captive generating plants, especially
government made bold assumptions regarding demand renewables, can transport electricity from one location
growth in the country and expedited the enhancement where they have surplus to another location in the grid. In
of generation capacity under the IPP regime. the medium term, the CTBCM will help optimize system
costs through a focus on efficiency, accountability, and
However, a few years down the road, different experts,
transparency, while in the long run, it will transform the
including system planners, started to question the
sector into an efficient, liquid, and competitive power
assumptions for such ambitious capacity expansion, and market.
terms like “capacity trap” or “surplus capacity” were
These assertions are not just claims but are based on
coined and debated heavily in policy discussions.
meticulously articulated goals, milestones, and roadmaps
However, in order to attract private investments, the
to achieve these targets. This year will not only mark the
government had already offered certain incentives,
operational launch of the initial design of the CTBCM but
including the protection of fixed capacity payments to
will also initiate the ambitious plan to transform the
secure the investment.
current power sector from its existing state towards an
For the new market, which was just being set up at the efficient and reliable system, ensuring affordable and
time, this state of affairs created a huge bottleneck. It was competitive electricity rates for consumers across the
argued that with the establishment of this market, new country.
entrants offering cheaper prices would attract customers
About the Author: Abrar Hussain is an engineer by profession
away from existing suppliers, resulting in customer
and currently serves as the Director of Market Design and
churn, while the cost of the existing agreements, which Simulations at the Independent System and Market Operator
are largely fixed, had to be borne by the remaining (ISMO) of Pakistan. He has been actively involved in Pakistan’s
customers or the government. In the presence of power sector deregulation initiatives for over a decade and has
diminishing demand, rising prices, and financial contributed to the development of the legal, policy, and
constraints of the government, this issue lingered on for regulatory frameworks required to establish a competitive and
several years without any practical solution. liquid electricity market in the country.
ICMA’s Chartered Management Accountant, Sep-Oct 2025 45