ISLAMABAD: The Overseas Investors Chamber of Commerce and Industry (OICCI) has proposed wide-ranging reforms in Pakistan’s power sector through practical and actionable measures aimed at enhancing regulatory clarity, improving the effective implementation of power wheeling, increasing grid efficiency, and enhancing overall sector competitiveness to restore investors confidence.
In this regard, Secretary General and CEO of OICCI, Abdul Aleem, has written a letter to Federal Minister for Power Sardar Awais Ahmad Khan Leghari, outlining a comprehensive set of proposed reforms for the power sector.
To accelerate competitive procurement of renewable energy, the OICCI emphasized that the national energy procurement model must decisively shift from a cost-plus regime to competitive auctions to reduce the overall power basket price and attract sustainable investment.
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Transparent auctions for all new capacity—particularly renewable energy—would help mobilize private capital and international development financing without adding to sovereign debt, while ensuring that new generation lowers costs rather than perpetuating the capacity payment burden.
On power wheeling, the Chamber proposed that the wheeling charges framework under the Competitive Trading Bilateral Contract Market (CTBCM) should incorporate performance-based incentives for industrial consumers.
Energy-intensive sectors such as engineering and manufacturing require a stable, cost-effective, and regionally equitable power supply.
Industries demonstrating sustained growth in production, exports, and internal efficiency should be rewarded through lower wheeling charges, encouraging continued grid connectivity. This approach would benefit sectors including textiles, engineering goods, agro-processing, and pharmaceuticals, while improving load predictability and the financial performance of DISCOs.
The OICCI further proposed that the Use of System Charges (UoSC) and wheeling charges be unbundled into distinct components covering transmission, distribution, system operations, and system losses.
The lack of transparency surrounding charges—such as the Rs 12.5 per unit levy—creates uncertainty and discourages investment.
Cost-reflective unbundling would enhance fairness, prevent hidden cross-subsidies, and strengthen confidence in CTBCM pricing signals.
Annual improvement targets for UoSC should also be established through transparent and gradual reductions in technical and commercial losses.
The Chamber also stressed that with increasing penetration of renewable energy, the grid operator must actively monitor system inertia and auction inertia services to maintain grid stability, in order to avoid blackout scenarios similar to those witnessed in Spain and Portugal.
Clear definitions and remedies should be established for situations where power is available but cannot be evacuated—commonly referred to as Non-Project Missed Volumes (NPMV). OICCI also recommended allowing commercial entities such as data centres, telecommunication facilities, and corporate offices to participate in CTBCM auctions.
While the initial 800 MW wheeling allocation provides an opportunity to test market functionality in a fragile power system, the OICCI cautioned that expansion should be gradual, evidence-based, and conditional upon system performance, settlement efficiency, and regulatory readiness.
Although bulk power consumers represent nearly 16,000 MW of demand, premature expansion could undermine system stability.
Wheeling charge methodologies, the Chamber said, should follow international best practices to ensure cost reflectivity while maintaining financial viability for DISCOs and regulated consumers.
Excessive or unsustainable wheeling charges could weaken DISCOs’ finances, increase fiscal pressure, and ultimately lead to higher surcharges, undermining the objectives of market liberalization.
To avoid the emergence of a two-tier electricity market, the OICCI proposed enabling small and medium-sized enterprises (SMEs) to participate through aggregation mechanisms. Virtual Power Plant (VPP) operators could serve as aggregators for smaller loads, providing demand response services during peak periods.
The Chamber also recommended the introduction of day-ahead and intraday electricity markets to manage renewable variability, improve system balancing, and enhance price discovery.
However, these markets should only be launched after adequate testing of system readiness, IT infrastructure, settlement mechanisms, and regulatory oversight.
To manage bidirectional power flows arising from the integration of more than 30,000 MW of imported solar PV capacity, OICCI called for the deployment of smart digital meters, real-time monitoring systems, and Distributed Flexible AC Transmission Systems (D-FACTS).
Battery storage should be installed at the grid and substation levels to store excess daytime generation and discharge during evening peaks, thereby mitigating intermittency and smoothing intraday price volatility.
Grid modernization, the OICCI said, should be financed through greater private sector participation, citing the successful development of the 800-kilometer HVDC transmission line as a model.
A supportive regulatory framework, along with sustainable tariffs and reasonable returns, is essential to attract long-term investment.
Dedicated transmission corridors should also be developed to connect renewable-rich regions, such as Jhimpir, Gharo, Punjab, and Sindh, with major industrial load centres, reducing curtailment and improving system efficiency.
Highlighting climate-related trade risks, the OICCI noted that Pakistan’s grid is 1.4 to 1.7 times more carbon-intensive than the EU average, exposing exporters to rising Carbon Border Adjustment Mechanism (CBAM) costs.
Access to verifiable green electricity through power wheeling and bilateral contracts is essential to maintain export competitiveness, as a €100 export item could face up to €40 in additional taxes by 2030.
The Chamber also proposed establishing a national carbon market framework to allow industries that reduce emissions below baseline levels to generate and trade carbon credits domestically and internationally, supporting investment recovery and compliance with global climate standards.
CTBCM should facilitate green bilateral contracts between renewable energy producers and industrial consumers, particularly in Export Processing Zones. Demand-side management and zone-specific UoSC differentiation should be applied to prevent grid distortion and reward efficient consumption patterns.
Incentives were also proposed for the localization of manufacturing of solar panels, wind components, and battery storage systems to reduce import dependence, lower costs, and strengthen domestic value chains.
The OICCI further recommended strengthening of the NEPRA with specialized expertise in market surveillance, financial modelling, and renewable forecasting. Regulatory frameworks should incorporate mechanisms to adjust transmission and distribution loss benchmarks and recovery targets in line with market liberalization and changing load profiles.
Suppliers of Last Resort (SoLR), with proper ring-fencing, should be allowed to participate as competitive suppliers through their subsidiaries, a move that could positively impact the future privatization of DISCOs.
The Independent System and Market Operator (ISMO) should be granted operational autonomy, adequate financial resources, and advanced technological tools to manage grid operations, market settlements, and balancing functions. Board members of ISMO should be independent and not hold any government or public office.
The OICCI urged consolidation of regulatory approvals across NEPRA, NGC, CPPA-G, ISMO, and related agencies into a coordinated, time-bound process to reduce uncertainty and accelerate investment. Investment in human capital across DISCOs, NEPRA, NGC, and ISMO was also emphasized, noting that the success of CTBCM would ultimately depend on the weakest institutional link.
Copyright Business Recorder, 2026