Pakistan Launches First Electricity Wheeling Auction as Government Moves to Exit Power Purchases

Pakistan's Power Division has invited proposals for the country's first-ever electricity wheeling auction, a step Power Minister Sardar Awais Ahmad Khan Leghari has described as the government practically exiting the power-purchase business it has run for roughly three decades.

What the auction actually offers

The Request for Proposals (RFP), issued in September 2026, opens the first phase of an 800MW wheeling programme to be rolled out over five years, with 400MW on offer in this initial round. Interested industrial and large consumers — those using more than one megawatt — will be able to bid to buy electricity directly from power producers rather than through the government's traditional single-buyer procurement system. The maximum allocation per participant is capped at 160MW cumulatively across all annual auctions over the five-year period, and the deadline for submitting proposals is November 20, 2026.

The mechanism behind the shift

The auction operates under the Competitive Trading Bilateral Contract Market (CTBCM), a framework designed to move Pakistan's electricity sector from a government-run single-buyer model toward a competitive market where businesses can negotiate and purchase power directly from generators. The National Electric Power Regulatory Authority (NEPRA) cleared a key hurdle for the shift in early September 2026 by determining the Use of System Charge — the fee consumers pay to move electricity they've bought elsewhere across the national grid — which the auction depends on to function.

Why the government wants out

Leghari called the launch a historic step, arguing that the state should step back from directly buying and reselling electricity and instead focus on developing the market infrastructure that lets producers and consumers transact on their own, an approach he said mirrors how power markets function in other countries. The push comes as Pakistan's government continues to carry a heavy financial burden from its existing government-brokered power purchase agreements, including capacity payments owed to power producers regardless of how much electricity they actually generate.

The circular debt backdrop

The reform arrives against a power sector still weighed down by chronic circular debt — the gap between what distribution companies collect from consumers and what they owe generators and fuel suppliers. That debt stood at roughly Rs1.675 trillion at the end of FY2025-26, up Rs61 billion over the year, according to government figures. Officials attributed most of that increase to a Rs98 billion cut to the sector's federal budget allocation rather than to the underlying operational picture; had the full Rs893 billion originally budgeted been released, circular debt would have declined instead. Distribution company under-recovery and inefficiency added roughly Rs326 billion during the year, while K-Electric's non-payment alone contributed around Rs194 billion. Our explainer on circular debt covers how this financial gap builds and why it's proven so difficult to close through budget allocations alone.

What it means for ordinary consumers, for now

The wheeling auction's initial phase is targeted squarely at industrial and large commercial consumers rather than households, meaning most residential electricity users won't see an immediate change in how they buy power or what they pay. The broader significance is structural: if the competitive market model proves workable at the industrial scale, it opens the door to a wider rollout that could eventually reshape how Pakistan prices and delivers electricity more generally — a shift relevant to the load-shedding pressures that have shaped public frustration with the power sector for years, and to household fuel and energy costs more broadly.

What to watch

The real test comes after the November 20 bid deadline, when the Power Division will need to show that industrial buyers are willing to participate at scale, and that the wheeling mechanism can actually move power across the grid without disputes over charges or reliability. A successful first auction would give the government a template to expand the programme; a thin or contested one would raise questions about whether Pakistan's power market is ready to function without the state as its central buyer.

Build Better Pakistan's Energy Desk tracks power sector policy and circular debt developments as part of our ongoing coverage.