‘Nepra & CCP rules essential’: A strong regulatory ecosystem needed to win investor trust: PC
ISLAMABAD: The Privatisation Commission has emphasised that establishment of a strong regulatory ecosystem, including comprehensive regulations by the National Electric Power Regulatory Authority (NEPRA) and Competition Commission of Pakistan (CCP), is essential to ensure investor confidence, consumer protection and competition in the post-privatisation power distribution market.
In its proposals for the post-privatisation regime for power distribution companies (DISCOs), the Commission identified a comprehensive regulatory framework, operational readiness and enforcement capacity as prerequisites for successful privatisation, warning that ownership changes alone would not resolve the structural challenges confronting the power sector.
The Commission maintained that the post-privatisation market architecture required a strong regulatory ecosystem within which electricity markets could develop while ensuring competition, protecting consumers and providing predictable conditions for investors.
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According to the proposed framework, NEPRA would oversee licensing, ring-fencing, open access, supplier conduct, price reporting, market exchange rules, Supplier of Last Resort (SoLR) arrangements and compliance with market-design parameters.
Meanwhile, predatory or discriminatory pricing, abuse of dominance and anti-competitive conduct would fall within the statutory domain of CCP.
The Commission proposed that NEPRA and CCP should ideally establish formal protocols for data-sharing, market monitoring and enforcement to ensure effective regulation of the emerging competitive electricity market.
It identified several key safeguards, including legal, operational and financial ring-fencing; data firewalls between Distribution Network Operators (DNOs) and affiliated suppliers; equal access to customer and metering data; and non-discriminatory connection and customer-switching processes.
Other proposed safeguards include transfer-pricing controls for related-party transactions, financial-security requirements for suppliers, consumer-protection and complaint-resolution regulations, periodic market-concentration reviews and compliance with applicable competitive bidding regulations.
A particularly significant regulatory gap identified by the Commission concerns procurement of investments by DNOs, including conflict-of-interest regulations governing related parties.
The Commission stated that such regulations were currently unavailable and would need to be developed by NEPRA and CCP to ensure fair and transparent competition in investment procurement by distribution network operators.
Under the proposed post-privatisation regime, NEPRA would be required to develop a comprehensive regulatory framework covering licensing requirements for DNOs, Competitive Suppliers (CSs) and Suppliers of Last Resort; market allocation and reallocation regulations; supplier financial-security and prudential requirements; and customer-switching and portfolio-transfer regulations.
The framework would also cover supplier-default and residual-supply arrangements, ring-fencing, affiliate transactions, network neutrality, consumer protection and market conduct.
DNO investment procurement regulations would specifically address fair and transparent competition, conflicts of interest and related-party transactions.
The Commission also stressed the importance of operational and market readiness before the introduction of competition in electricity supply.This would require reliable customer, billing, metering and capacity-allocation data; settlement and payment mechanisms capable of supporting multiple suppliers; and systems for registration and monitoring of capacity and portfolio transfers.
Protocols would also be required for transferring customers following a supplier’s default, alongside appropriate market-monitoring and reporting tools and operational readiness of the relevant Supplier of Last Resort.
On regulatory capability, the Commission proposed building adequate institutional capacity and specialist expertise within NEPRA and CCP, establishing coordination arrangements between NEPRA, CCP and other relevant institutions, and introducing defined reporting, audit and compliance requirements for market participants.
It further identified the need for NEPRA’s investigation and enforcement regulations and regulations governing the appointment of administrators.
The Commission emphasised that the reform process should be guided by clearly defined design principles, including regulatory independence and data-led regulation, requiring standardised, auditable and digitally enabled reporting to support timely decisions, performance monitoring and early intervention.
In its concluding assessment, the Commission stated that the proposed market architecture, comprising regulated DNOs with performance-linked returns, a progressively competitive electricity supply segment, a credible Supplier of Last Resort and ring-fenced ancillary businesses, could only deliver the intended outcomes if the necessary governance arrangements were established before the DISCOs changed hands.
“Privatisation transfers ownership; it is the regulatory framework that determines whether that transfer translates into lower losses, better service and sustainable tariffs for consumers,” the Commission observed in its proposals.
The Commission maintained that the structural challenges confronting the power sector were the result of decades of misaligned incentives and could not be resolved through a change of ownership alone.
The proposed reforms have accordingly been designed as a coherent package intended to address fiscal, operational and service-quality problems through a market structure that aligns risks with responsibilities, rewards performance rather than asset growth, protects vulnerable consumers through targeted support instead of blanket subsidies and provides investors with predictable conditions for committing capital.
It emphasised that sequencing of reforms was critical, with prerequisites for market opening to be treated as mandatory conditions for each stage of implementation.
“NEPRA’s readiness would be assessed and publicly reported at every milestone before proceeding with further market opening,” said Privatisation Commission.
Copyright Business Recorder, 2026