Power market reform gains momentum as NEPRA approves Wheeling Auction Framework, sets CMOD from Jan 22, 2026

KARACHI : Pakistan has taken a significant step towards power sector liberalisation as the National Electric Power Regulatory Authority (NEPRA) has approved the Wheeling Auction Process and formally declared January 22, 2026 as the Competitive Market Operations Date (CMOD), paving the way for the launch of a competitive electricity market.
In its determination, NEPRA directed the Independent System and Market Operator (ISMO) to immediately operationalise the auction framework and initiate preparatory steps for issuance of the Request for Proposal (RFP), ensuring strict compliance with transparency, competition and procedural fairness.
The Authority has received detailed written comments from ten (10) stakeholders, namely Mr. Rehan Javed, Faisafabad Chamber of Commerce & Industry (FOCI), Federation of Pakistan Chambers of Commerce & Industry (FPCCI), Faisalabad Electric Supply Company Limited (FESCO), Lahore Electric Supply Company Limited (LESCO), Quaid-e-Azam Solar Power (Pvt) Ltd. (QASPL), Competitive Electricity Market Alliance (CEMA), Punjab Power Development Board (PPDB), Rawalpindi Chamber of Commerce & industry (RCCI) and K-Electric Limited (K-Electric).
Rehan Javed and FPCC1 observed that the proposed quantum is modest as in comparison with the industrial demand and suggested a demand-responsive expansion mechanism in case of oversubscription, with Mr. Rehan Javed indicating that the quantum could move closer to 2,000 MW if auctions are oversubscribed. RCCI also commented that the proposed 800 MW is limited and suggested increasing it to around 3,000-4,000 MW to enable wider participation. RCCI further suggested lowering the minimum load threshold of more than 1 MW so that a larger number of industries may participate in the wheeling market.
According to the determination, the move is aimed at enabling competitive price discovery for stranded costs under open access and ensuring transparent allocation of wheeling capacity among market participants.
To facilitate this transition, the Federal Government had earlier amended Strategic Directive 87 of the National Electricity Plan and Rule 5 of the Eligibility Criteria (Electric Power Supplier Licences) Rules, 2023. The amendments, notified in August 2025, required the government to issue policy guidelines for addressing stranded costs arising from market liberalisation.
Subsequently, the Framework Guidelines for Wheeling Auctions, 2025 were approved and notified on January 22, 2026. In line with these guidelines, ISMO submitted the draft auction process to NEPRA on January 28, 2026, after which the Authority initiated public consultation on February 18, 2026, inviting feedback from stakeholders.
NEPRA received detailed comments from ten stakeholders, including industry representatives, chambers of commerce and distribution companies. A key concern raised was the proposed auction quantum of 800 MW, which several stakeholders described as insufficient to meet industrial demand. Suggestions were made to expand the limit significantly and to lower the minimum eligibility threshold of 1 MW to allow broader participation.
Responding to these concerns, ISMO clarified that the 800 MW cap is an initial limit set under the National Electricity Plan and may be increased based on market response. It also noted that the 1 MW threshold is consistent with international practices for wholesale markets and could be reduced once the market transitions to the retail level.
Stakeholders also highlighted the lack of clarity regarding transmission and distribution network constraints, particularly the absence of node-wise capacity information prior to the auction. ISMO maintained that detailed connection studies are technically complex and would be conducted after the auction. However, it assured that general guidance on network conditions and constraints would be provided through pre-bid briefings.
Concerns were also raised about the absence of upper and lower bid limits, with stakeholders warning of potential price volatility. ISMO responded that the auction is designed primarily for transparent allocation rather than revenue maximisation and that the one-year applicability of bids would limit speculative behaviour.
NEPRA identified transparency in transmission node allocation as a critical issue and amended the auction process to require that any limits imposed in the RFP must be backed by appropriate technical justification.
The Authority also noted that a comprehensive transmission node assessment study would only be completed by January 2027, which could result in information asymmetry during the first auction. To address this, NEPRA directed ISMO to publish an Interim Congestion Disclosure Note along with the RFP, providing sufficient information on network constraints to enable informed decision-making by participants.
Furthermore, ISMO, in coordination with transmission and distribution companies, has been directed to hold pre-bid technical briefings and publish their proceedings to ensure equal access to information.
On governance, NEPRA stressed the importance of neutrality of the Auction Committee and mandated that all seven members submit conflict-of-interest declarations prior to the auction. The Authority rejected proposals for inclusion of provincial representatives and the establishment of a separate grievance redressal body, citing risks of conflict of interest and administrative inefficiencies.
To enhance transparency, ISMO has also been directed to publish a post-auction summary detailing the evaluation process, number of bidders, total demand and rationale for allocation decisions, subject to confidentiality requirements.
NEPRA observed that Pakistan’s electricity market is currently in a transitional phase and that the auction framework has been tailored to local conditions rather than replicating models from mature markets.
With CMOD now in effect from January 22, 2026, all relevant entities have been instructed to complete their respective obligations within the prescribed timelines, while ISMO has been tasked with immediate implementation of the approved auction process. Ends