Establishment of independent multiplayer market for power sector approved amid call for tariff cut

ISLAMABAD: As the ruling coalition doubles down on its efforts to reduce all-time high tariffs, the Cabinet Committee on Energy (CCoE) on Wednesday authorised the establishment of an independent multiplayer market for power generation and purchase to end the government’s role as a sole buyer of electricity.

In the meeting chaired by Prime Minister Shehbaz Sharif, the committee principally approved the constitution of an Independent System and Market Operator (ISMO) which will be later endorsed by the federal cabinet and registered with the Securities and Exchange Commission of Pakistan under the Companies Act 2017.

“The ISMO is aimed at gradually decreasing the government’s role as a sole buyer of electricity and turning the electricity market into a multiplayer independent, transparent and competitive market,” stated a statement from the Prime Minister’s Office (PMO).

Furthermore, the independent operator will also allow the power consumers to purchase electricity from suppliers other than power distribution companies.

Under the ISMO, long-term planning would be made to produce low-cost electricity and its transmission besides reducing the power prices and circular debt. The ISMO Board will comprise experts from the power sector.

The participants of the meeting were briefed on the circular debt of the power sector.

Speaking on the occasion, PM Shehbaz said the priority measures were being taken for the power sector reforms and instructed accelerated actions to reduce power theft and losses besides taking disciplinary action against the employees of the distribution companies involved in the theft.

The prime minister also directed the authorities concerned to utilise modern technology to bring reforms and curb power theft.

The high cost of electricity has become a contentious political issue, with opposition parties leveraging public dissatisfaction to criticise the incumbent government’s handling of the energy sector and agreements with independent power producers (IPPs).

The burden of high electricity tariffs falls disproportionately on the middle and lower-income segments of society, fueling public outrage and eroding trust in the government’s ability to manage the economy.

Analysts noted that a successful renegotiation with both local and international IPPs would drastically reduce tariffs, boost industrial competitiveness, and increase public trust in the government's ability to effectively manage the economy.

On the other hand, a failed renegotiation could multiply the tariffs, bringing the government and consumers under added financial strain, crippling industry, and fanning public unrest.