The Cabinet Committee on Energy (CCoE) approved the establishment of an independent multiplayer market for power generation and purchase, aiming to gradually end the government’s role as the sole purchaser of electricity.
Experts assert that an independent operator can effectively connect buyers and sellers of electricity, resulting in increased efficiency and more competitive market prices.
According to a statement from the Prime Minister’s Office (PMO), “The committee, chaired by Prime Minister Shehbaz Sharif, principally approved the formation of an Independent System and Market Operator (ISMO), which will later be endorsed by the federal cabinet.”
The statement noted that the ISMO is designed to gradually reduce the government’s role as the sole buyer of electricity, transforming the electricity market into an independent, transparent, and competitive entity.
“It will also allow power consumers to purchase electricity from suppliers other than power distribution companies,” the statement added.
Under ISMO, long-term planning will focus on producing low-cost electricity and improving its transmission while reducing power prices and circular debt. The board of ISMO will comprise experts from the power sector.
Better Deals for Consumers
Ammar Khan, a professor of practice at the Institute of Business Administration (IBA) Karachi, explained to Dawn.com that ISMO essentially lays the foundation for a competitive electricity market.
“An independent operator can effectively connect buyers and sellers of electricity, moving away from a traditional single-buyer model,” he said. This can result in electricity being produced and transmitted more efficiently and competitively, ultimately reducing prices in the mid-to-long term.
An ISMO oversees the real-time operations of the electricity grid, balancing supply and demand to ensure a stable power supply. It also creates a competitive electricity market by allowing multiple electricity suppliers (generators) to sell electricity to buyers (distributors and large consumers).
This can lead to lower electricity prices by increasing competition among power generators, forcing them to offer better deals to consumers. Khan noted that consumers can choose the supplier offering the best rates, similar to selecting an internet or mobile phone plan.
Moreover, this decision may also enhance efficiency. “With an ISMO in place, electricity is generated and delivered more efficiently, meaning fewer power losses, reduced costs, and more reliable energy for consumers,” he said.
