Pakistan has launched the bidding process for its first 400 MW electricity wheeling auction, opening the door to a new model in which large consumers can purchase power directly from producers instead of relying solely on the government as the central buyer.
The initiative is being viewed as an early step toward a more competitive electricity market, particularly for industrial consumers that require large and predictable supplies of power.
How Pakistan’s New Power Wheeling System Works
For decades, Pakistan’s electricity market has largely operated around a single-buyer structure. The government purchased electricity from generators through long-term arrangements and then supplied it to consumers through the country’s distribution network.
The new wheeling framework changes that relationship by allowing eligible bulk consumers to negotiate directly with electricity producers.
In a detailed post on X, economist and adviser to the Federal Minister for Power Ammar H. Khan explained how the system could work and outlined several reforms that may follow the first 400 MW auction.
Under the model, an industrial consumer requiring 50 MW, for example, could approach a power producer and negotiate a bilateral agreement for the required supply. The government would not necessarily have to participate as a buyer in that transaction.
The basic process involves several steps:
- A large consumer identifies an electricity supplier and agrees on a bilateral power purchase contract.
- The electricity producer delivers power through the existing transmission and distribution network.
- The buyer or supplier pays a wheeling or use of system charge for using that network.
- Available network capacity is allocated through competitive bidding.
The electricity would still move through Pakistan’s existing grid infrastructure. Distribution companies and the National Grid Company operate the network, meaning private power transactions still depend on access to the national transmission and distribution system.
This makes the wheeling charge an important part of the new market structure. Khan compared the payment to a toll for using a motorway.
Nepra has approved variable wheeling charges ranging from Rs. 6.23 to Rs. 19.62 per unit for participating bulk consumers, depending on their category. A fixed grid charge of Rs. 1 per kilowatt per month has also been approved.
The 400 MW auction will determine which participants receive access to the available network capacity. The government has established a base level, while bidders will compete for the capacity on offer.
Khan said competitive bidding could help establish a market clearing price while directing limited grid capacity toward consumers willing to pay for access.
The wider framework envisages 800 MW being auctioned over five years, with 400 MW being offered during the first phase.
What the Electricity Wheeling Auction Could Change
The new system could eventually allow independent power producers to enter direct agreements with industrial consumers without requiring the government to sign another long-term power purchase contract.
That could gradually reduce the government’s role as the primary purchaser of electricity and give consumers and producers greater control over their procurement decisions.
Khan has stressed that the first 400 MW auction represents only an early stage of the reform process.
One possible next step is the emergence of competitive electricity suppliers capable of aggregating power from several smaller producers and selling it to customers through market-based contracts.
For instance, a supplier could potentially purchase surplus electricity generated by numerous solar installations, combine the available supply and sell it to industrial or other eligible customers at an agreed price.
Such a model would require additional changes to Pakistan’s electricity market rules, including stronger mechanisms for balancing supply, managing contracts and ensuring reliable access to the grid.
Location Based Grid Charges and Future Power Projects
Another issue raised by Khan is the way consumers are charged for using the transmission system.
He has argued that Pakistan could eventually move toward more location-based use of system charges, allowing network fees to better reflect the actual cost of transporting electricity between different parts of the country rather than relying mainly on a flat-rate structure.
Khan has also questioned whether consumers should continue financing major power projects entirely through electricity bills.
He suggested that projects delivering significant water-related benefits could instead receive funding through the government budget or water charges, depending on the nature of the project.
Future investment decisions will also need to account for the rapid growth of solar generation and battery storage.
As more consumers generate and store their own electricity, Pakistan’s power market could face a different set of requirements around grid demand, backup capacity, network investment and electricity pricing.
The first 400 MW wheeling auction therefore represents more than an additional procurement mechanism. It provides an early test of whether direct power transactions and competitive access to the grid can become a larger part of Pakistan’s electricity market.
