Committee approves independent multiplayer market for electricity

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The Cabinet Committee on Energy (CCoE) on Wednesday approved the establishment of an independent multiplayer market for power generation and purchase to gradually end the government’s role as a sole purchaser of electricity.

Experts say that an independent operator can effectively connect buyers and sellers of electricity, resulting in more efficiency and market competitive 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 be later be endorsed by the federal cabinet.”

It stated that the ISMO is said to gradually decrease the government’s role as a sole buyer of electricity and turn the electricity market “into a multiplayer independent, transparent, and competitive market”.

“It will also allow the power consumers to purchase electricity from suppliers other than power distribution companies”, the statement added.

“Under ISMO, long-term planning would be made to produce low-cost electricity and its transmission besides reducing the power prices and circular debt,” the statement read, adding that its board will “comprise the experts from the power sector”.

‘Better deals for consumers’

Ammar Khan, professor of practice at the Institute of Business Administration (IBA) Karachi, told Dawn.com that ISMO “basically lays foundation for a competitive market of electricity.

“An independent operator can effectively connect buyers, and sellers of electricity, moving away from a traditional single-buyer model of electricity, “ he explained, highlighting that this can result in electricity “being produced, and transmitted in a more efficient, and market competitive way — reducing prices in the process over 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, in addition to creating 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 between power generators, forcing them to offer better deals to consumers, according to Khan.

“Consumers can choose the supplier that offers the best rates,” he noted, adding that this will also allow consumers more choices and better deals — similar to choosing an internet or mobile phone plan.

Moreover, this decision may also improve 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.

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