Provincial concerns on electricity market liberalisation

The proposed amendments to Strategic Directive-87 under the National Electricity Plan 2023-27 have triggered strong resistance from three provincial governments, underscoring the depth of unresolved issues in the transition to a more competitive power market. The Power Division’s plan to open the electricity market to competitive access for up to 800 MW over five years has met constitutional, economic and practical objections that cannot be brushed aside if the reforms are to have legitimacy and long-term viability.

Sindh’s response was the most detailed, grounding its objections in Article 157 of the Constitution, which empowers provinces to develop, transmit and distribute electricity within their own jurisdictions. It argued that any federal directive must respect this mandate and avoid imposing structural or pricing mechanisms that undermine provincial rights or market competition. The province’s concerns extend beyond constitutional principle. By linking stranded cost recovery to the full generation capacity charges of the Supplier of Last Resort, the proposed framework risks making open access economically unviable, defeating the stated objective of market liberalisation.

Sindh’s recommendations were specific. It called for a phased or tapered approach to stranded cost recovery, inclusion of efficiency gains in stranded cost calculations, and third-party validation of the methodology with provincial input. It also rejected the fixed 800 MW cap over five years, saying it unfairly restricts industrial zones such as Karachi, which carries the country’s largest industrial load. Instead, it suggested that the regulator determine the cap dynamically based on grid capacity and market signals, with provincial quotas to ensure equitable access. On auctions, Sindh sought formal provincial representation in framework design and oversight, and regular consultations between the Independent System and Market Operator, the Ministry of Energy, and provincial governments.

Mehfoozun Nabi

Hyderabad

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