CTBCM: Pakistan cannot build a market while preventing competition

Pakistan’s electricity sector is once again being presented with a reform that sounds transformative but risks becoming largely cosmetic. The Competitive Trading Bilateral Contract Market (CTBCM) is being promoted as the beginning of a competitive electricity market. Yet the architecture being put in place remains fundamentally incompatible with the operation of a genuine market.

The central problem is simple. Pakistan is attempting to introduce competition while preserving the essential features of the single-buyer model.

The first indication is the decision to limit initial participation to only 200 MW. In a system with roughly 50,000 MW of installed capacity, such a quantity is economically insignificant. It needs to be clarified if this will be a one-time auction of 200 MW of power with long-term contracts or will they be short-term trading of this quantity? For a market to be formed there must be regular trading of power transparently between eligible buyers.

0.4 percent of available power cannot generate meaningful liquidity, competition, or price discovery. No serious electricity market has ever emerged through the administrative rationing of participation. With this system will power be supplied at 2 different prices one for the auction market and another for consumers? If so, will there be a cross subsidy?

The second contradiction is even more important. Most existing generation capacity has already been tied up through long-term contractual arrangements extending years and often decades into the future. Capacity payments continue regardless of dispatch and the overwhelming majority of generation remains linked to centralized procurement structures. CTBCM is therefore being asked to function as a market after most of the available supply has already been allocated elsewhere.

The problem extends to future supply. Through long-term procurement plans, sovereign guarantees, centralized contracting and administrative planning, a substantial portion of future generation additions has effectively been committed well in advance. Pakistan is not merely locking up today’s generation. It is also locking up much of tomorrow’s generation. The result is a system where both existing and future supply are increasingly pre-determined before market participants are allowed to compete.

This reality alone renders the proposed market structurally weak. Markets require uncommitted supply responding to demand. They do not function efficiently when most production has already been assigned through administrative arrangements.

The wheeling framework introduces another layer of complexity. Across successful markets, wheeling charges recover the cost of network services. In Pakistan, they increasingly risk becoming vehicles for recovering historical liabilities, procurement mistakes, cross-subsidies, circular debt consequences and other legacy burdens. If competitive consumers are required to carry the weight of every historical policy failure, competition will be strangled before it begins.

Hybrid consumption is a welcome exception. Allowing consumers to source part of their demand competitively while retaining grid supply reflects commercial reality. Industrial consumers need flexibility, not ideological purity. Yet hybrid consumption cannot compensate for a market design that continues to limit entry, restrict scale and preserve centralized control.

The debate on DISCO privatization exposes a further misconception. Privatization is not competition. A privately-owned monopoly remains a monopoly. If distribution companies retain exclusive retail rights within their territories, ownership changes but market structure does not. In fact, privatization without retail competition may entrench monopoly power and make future reform even harder.

The logical reform path is clear. The wires business should remain regulated while electricity supply becomes competitive. Consumers should ultimately be free to choose suppliers using the same network. That is how genuine competition develops.

Most importantly, Pakistan requires a real wholesale electricity market and power exchange. Bilateral contracts alone are insufficient. At least half of all electricity generation should progressively be traded through a transparent exchange where buyers and sellers compete openly. Such a market would provide genuine price discovery, efficient dispatch, transparent valuation of flexibility and storage, and meaningful investment signals.

International experience is instructive. Markets such as PJM in the United States, ERCOT in Texas, Nord Pool in Europe, Australia’s National Electricity Market and India’s rapidly expanding power exchanges all rely on meaningful volumes being traded competitively. Competition occurs because generation is not overwhelmingly pre-allocated through administrative arrangements. Prices emerge from market interaction rather than regulatory design.

Pakistan’s current trajectory risks producing the opposite outcome: a heavily administered system with a small competitive annex attached to it.

The argument that competition must be restricted to protect existing consumers misses the point. Existing obligations are real and must be managed responsibly. But restricting competition does not eliminate those obligations. It merely delays adjustment while encouraging consumers to seek alternatives through rooftop solar, captive generation and self-supply arrangements outside the system.

Consumers are already voting with their capital. The policy choice is whether to organize this transition through transparent markets or continue resisting it through administrative controls.

Pakistan’s electricity crisis was not created by excessive competition. It emerged from decades of centralized procurement, distorted incentives, weak accountability, risk transfers to consumers and taxpayers, and the insulation of investment decisions from market discipline. The answer cannot be more central planning presented as market reform.

A serious reform agenda would immediately expand CTBCM access, separate network charges from legacy-cost recovery, establish a transparent transition mechanism for stranded costs, encourage hybrid consumption, create an independent power exchange, separate retail supply from network ownership, and progressively migrate a substantial share of generation into competitive trading arrangements.

Markets cannot be created while being protected from competitive outcomes. Competition cannot flourish when participation is rationed, supply is pre-assigned, future generation is already committed and retail monopolies remain intact.

Pakistan does not need another reform acronym. It needs a functioning electricity market.

Copyright Business Recorder, 2026