ISLAMABAD: In a significant move toward a competitive electricity market, the National Electric Power Regulatory Authority (Nepra) has approved the Wheeling Auction Process and set the Competitive Market Operations Date (CMOD) as January 22, 2026.
In its determination, Nepra instructed the Independent System and Market Operator (ISMO) to promptly operationalise the auction mechanism and begin preparatory steps for issuing the Request for Proposal (RFP), while ensuring transparency, competition, and procedural fairness.
Providing background, Nepra explained that to enable competitive price discovery for recovering stranded costs under open access, the federal government revised Strategic Directive 87 of the National Electricity Plan and Rule 5 of the Eligibility Criteria (Electric Power Supplier Licences) Rules, 2023. These changes, notified in August 2025, required policy guidelines to tackle stranded costs resulting from market liberalisation.
Following this, the government issued the Framework Guidelines for Wheeling Auctions, 2025, on January 22, 2026. ISMO submitted the proposed auction process to Nepra on January 28, 2026, after which the regulator held a public consultation, issuing notices on February 18, 2026, and inviting stakeholder input.
Nepra received feedback from ten stakeholders, including chambers of commerce, distribution companies, and industry representatives. Some participants described the proposed 800MW auction volume as insufficient and urged a substantial increase to meet industrial demand. Others suggested lowering the minimum load requirement of 1MW to broaden participation.
ISMO responded that the 800MW cap is an initial ceiling under the National Electricity Plan and may be raised depending on market response. It added that the 1MW threshold is consistent with global wholesale market practices and could be reduced at the retail level.
Concerns were also raised about unclear transmission and distribution node capacities. ISMO stated that detailed connection studies would be conducted after the auction due to their complexity, but assured that general guidance on network constraints would be shared during pre-bid briefings.
Regarding pricing, stakeholders warned about the lack of bid caps and the risk of volatility. ISMO maintained that the auction aims at transparent allocation rather than revenue generation, making bid limits unnecessary. It also highlighted that bids would be valid for one year only, limiting speculative behavior.
Nepra identified transparency in transmission node allocation as a key concern and revised the auction framework to require that any limits set in the RFP be backed by solid technical justification.
The Authority noted that a full transmission node assessment study will not be completed until January 2027, which may lead to information gaps in the first auction. To mitigate this, Nepra directed ISMO to release an Interim Congestion Disclosure Note alongside the RFP, providing enough data on network constraints for informed bidding.
Additionally, ISMO, in coordination with transmission and distribution companies, has been asked to hold pre-bid technical briefings and make their proceedings public to ensure equal access to information.
On governance, Nepra stressed maintaining neutrality within the Auction Committee and required all seven members to submit conflict-of-interest declarations before the auction. It dismissed proposals for provincial representation and a separate grievance redressal body, citing risks of conflicts and administrative delays.
To further strengthen transparency, ISMO has also been instructed to publish a post-auction report detailing the evaluation process, number of bidders, requested capacity, and reasons for final allocations, subject to confidentiality requirements.
Nepra concluded that Pakistan’s electricity market is still in a transitional stage and that the auction framework has been tailored to domestic conditions rather than mirroring advanced international markets.
With CMOD effective from January 22, 2026, the regulator has directed all relevant entities to fulfill their responsibilities within the set timelines. ISMO has been instructed to move ahead immediately with implementing the auction process in line with Nepra’s determination.
