Pakistan’s power regulator approves first electricity wheeling auction mechanism

Pakistan’s power regulator has approved the country’s first competitive electricity wheeling auction mechanism and declared January 22, 2026, as the start of commercial market operations, marking a shift from the single-buyer power model. The National Electric Power Regulatory Authority (Nepra) cleared the auction framework submitted by the Independent System and Market Operator (ISMO), allowing competitive allocation of up to 800 megawatts of electricity demand while enabling recovery of stranded costs linked to market liberalisation. 

The first auction is expected to take place around June or July 2026.

The approval follows amendments to the National Electricity Plan and supplier licensing rules notified in August 2025, which required the government to introduce policy guidelines for addressing stranded costs. These were formalised through the Framework Guidelines for Wheeling Auctions issued on January 22, 2026, under which ISMO submitted its auction design for regulatory approval.

Nepra conducted a public consultation in February 2026, receiving input from ten stakeholders, including chambers of commerce, distribution companies and industry representatives. Some participants termed the 800MW auction cap insufficient and proposed increasing the quantum, while others suggested reducing the minimum load requirement of 1MW to widen participation.

ISMO responded that the 800MW ceiling is an initial limit under the National Electricity Plan and may be revised based on market response. It maintained that the 1MW threshold aligns with international wholesale market practices and could be adjusted at the retail stage.

Stakeholders also raised concerns over limited clarity on transmission and distribution node capacities. ISMO stated that detailed connection studies would be conducted after the auction due to technical complexity but committed to providing general guidance on network constraints through pre-bid briefings.

On pricing, concerns were raised about the absence of bid caps and potential volatility. ISMO maintained that the auction is designed for transparent allocation rather than revenue maximisation, adding that the one-year validity of bids would limit speculative risks.

Nepra incorporated several conditions to address transparency and governance concerns. It directed ISMO to publish an interim congestion disclosure note alongside each request for proposals until a full transmission node assessment study is completed in January 2027, to reduce information gaps for bidders.

The regulator also required pre-bid technical briefings by ISMO, transmission and distribution companies, with proceedings to be published to ensure equal access to information. Any limits imposed in the bidding documents must be supported by technical justification.

To ensure neutrality, all seven members of the auction committee must submit conflict-of-interest declarations before proceedings. Anti-collusion measures cap any single bidder or affiliated group at 20 percent, or 160MW, of total auctioned capacity.

ISMO has also been directed to publish a post-auction summary including evaluation criteria, number of bidders, demand requested and allocation outcomes, subject to confidentiality constraints. Nepra rejected proposals for provincial representation and a separate grievance redressal mechanism, citing administrative and conflict-related concerns.

The regulator stated that the framework aligns with principles of transparency, non-discrimination and procedural fairness as Pakistan transitions to a Competitive Trading Bilateral Contract Market.

It added that if ISMO fails to comply with any regulatory direction within 30 days, the auction process will be deemed amended accordingly.

The power minister described the approval as a milestone in moving from policy planning to implementation, crediting coordination among the Ministry of Energy, Nepra, ISMO, the Central Power Purchasing Agency, the Private Power and Infrastructure Board and distribution companies.

Nepra said the market remains in an early transition phase and the framework has been designed according to local conditions, with scope for adjustments based on market performance.