In a major reform linked to Pakistan’s commitments with the International Monetary Fund (IMF), the country’s first deregulated electricity market is set to become operational in March.

Initially, 200 megawatts (MW) of electricity will be offered for sale, marking a significant shift toward a competitive power market.

Officials say the launch of the deregulated power market is a major step toward fulfilling another IMF condition. For the first time, electricity will be traded in a competitive environment instead of being sold solely through the traditional distribution system.

Sources confirm that 200MW of electricity will be offered for auction when the market opens in March. The deregulated market will initially cater to B3 and B4 category industries, allowing them to purchase electricity directly from sellers of their choice.

Over the next four years, the volume of electricity available in the competitive market is expected to increase from 200MW to 800MW.

Large consumers to benefit first

In the first phase, electricity will be sold to large consumers with a load of one megawatt or more. These consumers will have the flexibility to buy the cheapest electricity available in the market, instead of being bound to a single supplier.

One of the most significant changes in the deregulated market is the elimination of capacity charges on electricity. Sources say this move is expected to reduce costs for large industrial consumers and improve competitiveness.

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Independent market operators have already been established to oversee the purchase and sale of electricity in the new system.

Installation and wheeling charges explained

Under the new structure, large consumers will only pay installation charges to power companies. However, they will be required to pay wheeling charges to distribution companies (DISCOs) for using the national grid and transmission wires.

According to sources, wheeling charges have been set at Rs6 per unit for B3 consumers and Rs9 per unit for B4 consumers.

Shift toward competitive power pricing

With the deregulated electricity market becoming operational, consumers will be able to choose from available suppliers and purchase the lowest-cost electricity in the market.

Energy experts view this as a transformative step toward market-based pricing, improved efficiency, and reduced burden on the power sector.