Pakistan’s electricity reforms should deliver reliable power at competitive costs—and turn those gains into affordable bills. Privatisation, open access and competitive supply must serve this objective, alongside a review of electricity taxation. Shifting costs between consumers, companies, and government does not make electricity cheaper.
The challenge is to make competition work through impartial network access and reliable payments. That requires clear commercial responsibilities, transparent access charges, explicit allocation of legacy obligations and functioning settlement arrangements. Consumer choice can then expand on a sound foundation.
The privatisation of distribution companies (DISCOs) must not allow the transaction timetable to outrun the market framework. Preparatory work can proceed in parallel, but final bids should rest on settled rules and disclosed liabilities. Before completing sales, the government should establish distinct network and supply responsibilities, enforceable access rights, transparent allocation of legacy costs, payment security and consumer protection. Investment obligations and performance targets must be binding and independently verifiable. Otherwise, regulatory uncertainty could depress sale prices and expose the government to disputes that should have been resolved beforehand.
DISCOs perform two distinct functions: operating networks and supplying electricity. Networks are natural monopolies that require regulation; supply can support competition. The accounts, costs, and obligations of these businesses must therefore be separated.
Network operators should maintain infrastructure, connect customers and transport electricity impartially. Suppliers should procure power, manage demand, bill consumers and collect payments. Where the businesses share ownership, enforceable safeguards must prevent the network operator from favouring its affiliated supplier. Selling a bundled monopoly without such safeguards could preserve the very barriers reform is intended to remove.
The immediate test for Pakistan’s Competitive Trading Bilateral Contracts Market (CTBCM) is straightforward: can an eligible consumer buy electricity from an alternative supplier with reliable network access and predictable charges?
Published network-capacity information, firm connection timelines and transparent charges are essential. Network charges should recover the efficient cost of transporting electricity. Loading them with unrelated losses would shield incumbent suppliers and undermine the commercial viability of competition.
Trading rights have little value if electricity cannot move efficiently. Transmission constraints limit market integration and raise the cost of managing congestion. Effective competition depends on a network capable of delivering the power being traded.
Network access and system operation must therefore develop alongside trading. Dispatch, balancing and curtailment rules should be transparent and applied impartially. Investment should target bottlenecks whose removal demonstrably improves service or lowers costs.
Credible network access creates the conditions for better procurement. Buyers should compare offers against their actual needs: delivery schedules, reliability, and responsibility for supply-demand imbalances. Low-cost intermittent generation is not the same as dependable electricity throughout the day. Comparisons must include transmission, storage and balancing costs where applicable.
Competitive auctions, standardised contracts and credible payment arrangements can further reduce the risks priced into bids. Offers should be assessed against local delivered costs, not another country’s headline tariff.
Existing contracts present a harder transition challenge. If customers switch suppliers without contributing to legacy capacity-payment obligations, the burden on remaining consumers increases. Yet loading every historical cost onto new transactions would prevent the market from developing.
Three categories must remain distinct: enforceable contractual commitments, operating inefficiencies and government subsidy obligations. Contractual commitments require explicit recovery arrangements; inefficiencies require corrective action and accountability; subsidies require budgetary funding. Combining them in a single charge obscures responsibility. Taxes collected through electricity bills should likewise be disclosed separately, rather than presented as part of the cost of supplying power.
Any transitional charge should identify the obligation being recovered, who must pay, how long it will apply and how it will be reviewed. It should honour contractual commitments without making competition unviable. Historical costs cannot simply disappear, but neither should they become a permanent barrier to efficient supply.
Under the CTBCM eligibility framework, consumer choice is initially confined to bulk power consumers with a sanctioned load of at least one megawatt. Regulatory eligibility, however, is not the same as effective access. The priority is to make that access work through clear contracts, impartial network access, transparent charges and reliable settlement. Experience with eligible consumers should guide any expansion to smaller users.
Households require a dependable default service. Carlos Batlle argues that marketing and customer-acquisition costs can outweigh the benefits of household retail competition (MIT CEEPR Working Paper 2026-20, November 2026). More suppliers do not necessarily mean lower bills. Competitive offers should be judged against the total default-service bill, including network charges and taxes, without counting tax changes as supply-cost savings.
A transparent default tariff should provide the benchmark. Billing, switching and supplier-failure arrangements must protect consumers. More complex pricing should follow—not precede—suitable metering and practical opportunities to adjust consumption. Households should not bear risks they cannot understand or manage.
Affordability also requires a review of electricity taxation, distinct from the cost of supplying power. Consumption-based taxes on an essential service can be regressive where relief for basic consumption is inadequate. Lower-income households generally spend a larger share of their income on essential electricity and are less able to absorb these charges. Tax reform should ease this disproportionate burden and protect basic household consumption. Competition alone cannot make electricity affordable if taxes keep final bills high.
Commercial discipline within utilities must underpin these reforms. Managers need operational authority and must be accountable for collections, losses, outages and service quality. Audited accounts and independently verified performance should determine rewards and consequences.
Government must honour its own obligations. An announced but unpaid subsidy becomes a utility cash shortfall, which in turn leaves bills unpaid elsewhere in the supply chain. No trading platform can compensate for a payment system undermined by its largest participants.
The National Electric Power Regulatory Authority (NEPRA) must enforce impartial access, scrutinise transactions between affiliated businesses and verify costs and performance. Tariffs should recover prudent expenditure without passing avoidable inefficiencies on to consumers. Denying legitimate revenue undermines investment; routinely making consumers pay for failure destroys accountability.
Implementation should be judged by operational readiness, not announcements. Network access, metering, settlement, payment security and consumer protection must work for eligible consumers before the market expands. Progress should be measured by delivered supply costs, final bills, reliability, collections, and investment. Reporting must distinguish efficiency gains from changes in taxes and subsidies, so that lower bills do not conceal unresolved sector costs.
The test of electricity reform is not a change in ownership or market structure, but more reliable service, lower delivered supply costs and affordable final bills. Meeting that test requires impartial network access, clear allocation of legacy obligations, reliable payments and enforceable accountability. A review of electricity taxation must complement—not substitute for—these reforms, with protection for basic household consumption. Otherwise, the sector may be reorganised without resolving its underlying costs or delivering meaningful relief to consumers.
Reference: Batlle, Carlos. “Why Do We Need Electricity Retailers? Twenty-five Years of Evidence: What Does Competition in Energy Services Need?” MIT Centre for Energy and Environmental Policy Research, Working Paper 2026-20, November 2026.
Copyright Business Recorder, 2026