Business activities could commence as early as late September, according to CTBCM
Pakistan's power sector is gearing up for a significant transformation with the imminent launch of the Competitive Trading Bilateral Contract Market (CTBCM). This market, expected to become operational by the end of September 2025, marks a significant step in Pakistan's power sector reforms aimed at introducing competition and efficiency in electricity procurement.
The Power Division has assured development partners that commercial operations for the CTBCM will commence by September 2025. A critical part of this transition is the establishment of the Independent System and Market Operator (ISMO), which will play a key role in facilitating CTBCM implementation. The operationalization of the ISMO, integrated from NTDC and CPPA-G teams, is now underway, and it is operationally structured to manage market operations following its separation from NTDC.
The CTBCM will initially operate with a capacity cap of 800 MW allocated over five years. A phased market opening will be implemented, supported by market rules and wheeling charges. Bulk power consumers with a demand of 1 MW or more will be able to purchase electricity directly through competitive contracts with suppliers, shifting away from monopolistic grid tariffs. This move is expected to provide more choice and competition to industrial and other large consumers, potentially leading to better pricing and service.
However, wheeling charges remain a challenge. The current proposed wheeling charge is around Rs 12.55/kWh (4.5 cents), which, when combined with generation tariffs, may keep the final electricity price above the existing grid tariff (~11 cents/kWh). This could limit incentives for some industries to switch to the competitive market. The government plans to reduce wheeling charges over time through reforms and clearing circular debt, expecting charges to drop to Rs 9.08/kWh by FY27 and further down to Rs 5.85/kWh by FY31, improving competitiveness.
The CTBCM launch is part of wider power sector reforms that include distribution company privatization, transmission system improvements, and generation company reforms. The government is also tackling tariff structure, circular debt, and subsidy rationalization to improve sector financial health and encourage investment.
In addition, a three-year package has been proposed for the industrial and agricultural sectors to stimulate demand and increase consumption. The rollout of 35 million AMI (Advanced Metering Infrastructure) meters is planned, aiming to improve metering accuracy and efficiency.
The government recently launched the 'Bijli Sahulat package' for winter months, offering electricity at marginal cost plus a nominal margin. The Power Division is finalizing a framework for viable open access charges (wheeling) and a transparent process for the allocation of wheeling quantum. Development partners have underscored the need for pricing predictability over the next 3-5 years, technology-neutral support policies, and caution against price discrimination.
Several transmission projects are underway to increase northward evacuation capacity by 2,000 MW over the next 3-4 years. The Power Division is actively pursuing a 10-year forward-looking plan for long-term generation and transmission planning. The CTBCM is poised to start by September 2025, allowing bulk consumers to engage in competitive electricity procurement, though its success will hinge on addressing wheeling charges and broader sector reforms for truly competitive and affordable power supply.
- The upcoming Competitive Trading Bilateral Contract Market (CTBCM) in Pakistan's power sector is expected to facilitate growth in investments, particularly for industries and large business consumers, due to the potential for better pricing and service from competitive contracts.
- The establishment of the Independent System and Market Operator (ISMO) is a key part of this transition, as it will manage the market operations for the CTBCM after its separation from NTDC.
- Financial reforms are also underway in the power sector, including distribution company privatization, subsidy rationalization, and tariff structure adjustments, to improve sector financial health and encourage investment.
- Efforts are being made to promote energy consumption in the industrial and agricultural sectors through a three-year package and the rollout of Advanced Metering Infrastructure (AMI) meters to improve metering accuracy and efficiency.
- The government is working on reducing wheeling charges over time through sector reforms and the clearing of circular debt, with the aim of improving competitiveness and addressing concerns that the final electricity price might remain above the existing grid tariff.
- The success of the CTBCM in providing affordable and truly competitive power supply hinges on addressing challenges such as wheeling charges and broader sector reforms, while maintaining pricing predictability, technology-neutral support policies, and avoiding price discrimination.
