In defence of CTBCM

A recent article published on 12-08-25 in Business Recorder, questioning the design, consultation process, and readiness of Pakistan’s Competitive Trading Bilateral Contracts Market (CTBCM), is based on misunderstandings and incomplete information.

The facts paint a very different picture by ignoring that the CTBCM design is developed based on careful planning, global benchmarking, rigorous testing, and structured implementation that provides both initial market opening, its gradual transition from the proposed market to gradually leading towards the retail market, which, for every market is a pre-requisite. Pakistan’s wholesale market design also provides stability and fairness with responsible opening of the market because of the current demand-supply situation in accordance with the policy objectives set by the CCI.

Contrary to the claim that CTBCM suffers from ‘poor design,’ the market framework was developed through a collaborative and evidence-based process. Technical experts including both local and international market specialists, Power Division, CPPA, NEPRA, and NTDC, were involved. In addition, more than ten international electricity markets were studied, incorporating lessons from these jurisdictions into Pakistan’s legal framework, operational, and grid realities. This approach has ensured that the model is both progressive and practical.

The market design features were finalized following extensive multi-stakeholder engagement and robust consultations at each stage coupled with extensive stakeholder involvement and training, from high-level concept development to shadow deployment (test run) of CTBCM framework to test IT systems and rules framed for the competitive market. Keeping in view our local peculiarities, proven mechanisms from global competitive markets were integrated, with every component.

To portray this work just highlighting as ‘poor design’ is professional injustice maybe because of gap in understanding of the writer and contrary to the process adopted based on the international best practices.

Further in this regard, the assertion of “no consultation” is incorrect. Numerous consultation sessions, training workshops were conducted with stakeholders, including:

• Workshops at LUMS on market design, legal and regulatory framework and operational readiness.

• Nepra conducted multiple public hearings during each step i.e., the high-level market design, detailed market design and also on the final test-run report conducted by Market Operator. Stakeholders’ comments were sought at every stage and based on due diligence the high-level and detailed design were approved.

• Nepra-led awareness sessions for Bulk Power Consumers (BPCs) and suppliers.

• Market Operator road-shows in key industrial regions to explain participation mechanics and benefits, followed by several consultative sessions at every stage of market development

These sessions were open forums where industry representatives, IPPs, and potential other market participants, including the suppliers, discussed design aspects and provided feedback much of which was incorporated into the market regulatory framework. Multiple capacity-building and technical training programs have been held to ensure participants are fully equipped to operate under the CTBCM.

In addition to the above, the CTBCM’s legal, policy and regulatory process, including the development of NE Policy, NE Plan, Rules and Regulations developed for introduction of competitive market, has gone through mandatory consultative process as per the applicable law/policy framework.

Further in this regard, the claim that the market is “still not there” ignores the facts that:

• The test run or trial run of the CTBCM has been successfully completed.

• The IT systems are not only fully operational and but also have undergone rigorous testing with actual data and under simulated market conditions.

• Monthly settlement statements have been generated every month and shared with stakeholders to familiarize them with the process.

• The final test run report was submitted to NEPRA after approval from Cabinet, and NEPRA has also conducted stakeholders consultations and public hearings in this regard.

• Independent System and Market Operator (ISMO), an independent and credible entity that will organize trading in market, has been operationalized since April 2025.

• National Electricity Plan and Rules have been approved by the Federal Government to make wheeling rate viable to enable wheeling transactions.

With technical, procedural, and operational readiness achieved, the commercial operation of the market is scheduled for September 2025 subject to determination of wheeling charge by NEPRA.

With regards to viable wheeling charges, wheeling charges in Pakistan reflect the cost of using the transmission and distribution network. The principle of policy is to levy Grid Charges, including the cross-subsidy in equal amount as is being paid by an existing consumer, which is fair, provides level playing field and also a global practice. The claim that the charges are arbitrary is not well founded and ignores international best practices and local realities of a long market where generation is more than the demand, and question of stranded assets’ costs is not immaterial.

Further, one of the most glaring factual errors in the recent critique is the claim that the 800 MW initial market cap equals “only 5% of national capacity.” This comparison is misleading.

The CTBCM is open only to Bulk Power Consumers (i.e., eligible consumers) having load greater than 1 MW. According to 2023–24 consumer data, these eligible consumers accounted for 16,306 GWh of consumption. The 800 MW allocation at a 70 percent load factor covers over 30 percent (~5,000 GWh) of the eligible consumer base, not 5 percent.

Phased rollouts are standard international practice to ensure system stability and allow for operational fine-tuning. The approach adopted is consistent with CCI stated policy objectives of responsible opening of the market particularly in the context of supply – demand situation and impact of stranded cost on the remaining consumers.

In the context of CTBCM framework coupled with the initial market phase which is opening at the wholesale level i.e., 1 MW above, the suggestion that SOLRs (including DISCOs and K-Electric) should hold competitive supplier licenses is flawed. Allowing an entity to be both a SOLR and a competitive supplier creates a structural conflict of interest.

Permitting an entity that simultaneously holds distribution and supplier of last resort licences to obtain a competitive supplier licence in the context of initial phase of CTBCM design would confer upon it an undue and distortive competitive advantage. Stating that SOLRs be also given competitive supplier licence indicates that the writer does not have full context and understanding of the international and the local wholesale market framework and purportedly pursues certain vested interest of certain entities.

Such an entity would possess both the commercial incentive and operational means to exploit its control over network infrastructure whether through preferential treatment, discriminatory access, or strategic use of information asymmetries. This not only compromises the fairness and efficiency of the market but also contravenes the broader policy objectives of ensuring open access, non-discriminatory practices, and genuine BPC choice. French Electricity Market is one such example, which is reported as a very bad experience, wherein SOLR was allowed to have competitive supplier licences, which restricted competition.

CTBCM is not an ‘expensive formality’ as the article claims; it is a reform incorporating international best practices, tailored to Pakistan’s unique needs, and backed by years of consultation, training, and testing.

Rather than pointing fingers based on inaccurate assumptions, it is time to acknowledge the progress and prepare to seize the opportunities this market will create for cheaper, more reliable, and competitive electricity.

It was a big undertaking that covered transformation of people, process, technology, restructuring of 13 institutions, development and testing of IT systems, including trading platforms, reform of legal, policy and regulatory framework (including Rules, Regulations and Codes) to training and capacity building of over 100 professionals to ensure that market runs smoothly after the its launch in September 2025.

Copyright Business Recorder, 2025