The Privatisation Commission has put forward a wide set of power sector reforms meant to ease investor worries as the government prepares to sell state-owned power distribution companies (Discos). The most far-reaching idea is to end the uniform electricity tariff that currently applies across those companies, so competing private suppliers could charge different rates while regulated prices continue for consumers served under a Supplier of Last Resort (SoLR) arrangement.
The proposals sit in a 25-page draft titled Power Distribution Companies’ Post-Privatisation Regime: Market Architecture, Business Models and Regulatory Oversight. Officials have sent it to relevant ministries, regulators and investors for comment. It is not an approved policy. The Commission expects to place it before the prime minister this week.
Why the package was drafted
Potential buyers raised concerns during domestic and international roadshows for the Disco sales. The draft aims to give them clearer long-term policy and regulatory signals before they bid.
Under the model, the state would gradually pull back from direct electricity buying and retail. The Central Power Purchasing Agency (CPPA-G), which today acts as the single buyer for much of the retail market, would give up that role for retail supply. Licensed Competitive Suppliers would procure power, manage customer portfolios and compete for consumers, with Nepra (Pakistan’s power regulator) overseeing both the wires business and market competition.
Private suppliers could design tariffs and contract lengths around procurement costs, demand patterns, payment records and service standards. They could also offer tailored packages for industrial, commercial and agricultural users, plus energy-efficiency options and structured payment plans. The regulated SoLR framework would still guarantee continuous supply where competition has not taken hold or if a supplier collapses.
How tariffs, subsidies and the grid would change
Other pillars include a time-bound push to shrink tariff differential subsidies and bring household prices closer to actual supply costs, while keeping targeted support for vulnerable households. The regulatory multi-year tariff period would lengthen from five to seven years.
Distribution network ownership would be separated from retail supply. Each firm’s physical grid would be ring-fenced. A Distribution Network Operator would run the regulated monopoly wires, give non-discriminatory access to licensed suppliers, and bear line losses above Nepra-approved benchmarks, recovering allowed losses through regulated revenues.
The draft would also replace asset-based returns with a performance-linked Return on Equity, Improvements, Efficiency and Losses (RIEL) model. Investors would get a base return drawn from the Capital Asset Pricing Model, with bonuses linked to service quality, efficiency and loss cuts. Nepra would tie incentives and penalties to reliability, fewer outages, technical compliance and faster dispute handling. Savings and loss reductions against benchmarks would be shared equally between utility owners and consumers, with performance-based returns capped at 50 per cent and audited each year.
Capacity, auctions and what comes next
A core safeguard is transferring legacy generation capacity-payment duties from CPPA-G to incoming private suppliers together with customer portfolios, so operators cannot take only profitable accounts and leave fixed costs with the state. As each Disco is privatised, CPPA-G or a designated body would auction its contracted capacity. Winning bidders would take a matching share of payment obligations and a representative mix of customers, including protected consumers, along with existing cross-subsidies and commercial risks.
Participation would be voluntary. The framework would drop the present one-megawatt eligibility threshold and the 400-megawatt and 800-megawatt transfer caps, with leftover capacity offered in later auctions. Existing power purchase agreements between CPPA-G and independent power producers would stay in place; CPPA-G would sign separate deals with private suppliers and allocate power from the generation pool on a pro-rata basis rather than assigning specific plants.
Over time, as legacy contracts expire, suppliers would take on demand forecasting and their own procurement through bilateral contracts, auctions or organised exchanges, backed by a regulated electronic platform for capacity trading. The market would open regionally as Discos are sold, allowing suppliers to trade across territories under regulated rules. The owner of each network operator would hold the territory’s SoLR licence, covering unallocated customers, temporary takeovers if a supplier defaults, and billing, collections and subsidised tariffs for protected consumers.
Aasan alfaaz mein
Sarkar Disco companies bechne se pehle bijli ke qawaid badalne ka draft le kar aayi hai. Ab har ilaqe mein aik hi rate na rahne ki soch hai, private companies alag rates de sakti hain. Gharilon ke liye last-resort supply aur kamzor logon ki madad ki baat rakhi gayi hai. Yeh abhi policy nahi, is haftay wazir-e-azam ke paas jane ka irada hai.
