Energy sector reforms: committee approves ISMO formation

In a major step towards reforming Pakistan’s energy sector, the Cabinet Committee on Energy gave its principal approval for the formation of the Independent System and Market Operator (ISMO), which will be further ratified by the Cabinet.

The development occurred during the Cabinet Committee on Energy meeting chaired by Prime Minister Shehbaz Sharif on Wednesday, read a statement released by the Prime Minister’s Office (PMO).

The ISMO will be an independent multi-player market for electricity generation and procurement in Pakistan.

This new system will enable consumers to directly purchase electricity from various suppliers, offering them an alternative to the traditional distribution companies.

As per the PMO statement, ISMO will be registered with the Securities and Exchange Commission of Pakistan (SECP) under the Companies Act 2017.

“ISMO will gradually end the government’s role as the sole buyer of electricity in the country, transforming the market into a multi-player independent market.

“Through this entity, an efficient and transparent competitive electricity market will be established in Pakistan.

“This system will allow consumers to purchase electricity from suppliers other than the distribution companies,” read the PMO statement.

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The government believes that ISMO will enable long-term planning for low-cost electricity generation and transmission systems, and significantly reduce circular debt, electricity tariffs in the power sector.

The energy sector plays a crucial role in Pakistan’s economy. On Tuesday, Business Recorder reported that Pakistan and Chinese power companies were all set to sign pacts on re-profiling of debts and moratorium on payment of over $16 billion for five and three years respectively during the visit of Chinese Prime Minister Li Qiang.

Meanwhile, the Cabinet Committee on Energy was briefed on circular debt in the energy sector.

“We are taking priority steps for reforms in Pakistan’s energy sector. Efforts to reduce theft and losses in the energy sector should be intensified and made more effective,” said PM Shehbaz.

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The prime minister instructed relevant authorities to take departmental action against the distribution company’s employees involved in electricity theft.

He emphasised the use of modern technology to ensure reforms and the prevention of theft in the power sector.

The meeting was attended by Finance Minister Muhammad Aurangzeb, Federal Minister for Planning and Development Ahsan Iqbal, Federal Minister for Economic Affairs Ahad Khan Cheema, Federal Minister for Energy Sardar Owais Ahmed Khan Leghari, Federal Minister for Petroleum Musadik Masood Malik, Minister of State for Power and Finance Ali Pervaiz and other members of the Cabinet Committee on Energy.