On Wednesday, the Cabinet Committee on Energy (CCoE) approved the establishment of an Independent System and Market Operator (ISMO), a move aimed at gradually ending the government’s role as the sole purchaser of electricity. The decision marks a significant shift towards a more competitive and transparent electricity market in Pakistan.
The committee, chaired by Prime Minister Shehbaz Sharif, greenlit the formation of ISMO, which will act as an independent operator to connect buyers and sellers of electricity. The plan is expected to transition the electricity market into a multiplayer, independent system, moving away from the traditional single-buyer model, and eventually reducing government intervention in the sector.
A statement from the Prime Minister’s Office (PMO) explained that the ISMO will allow consumers to purchase electricity from various suppliers, besides the power distribution companies, offering more choices in the market. The board of ISMO will include experts from the power sector, and long-term planning under its supervision will focus on producing low-cost electricity, improving transmission, and reducing power prices and circular debt.
A Step Towards Competitive Market
Ammar Khan, Professor of Practice at the Institute of Business Administration (IBA) Karachi, spoke to Dawn.com about the ISMO’s potential impact. He noted that the establishment of ISMO will lay the foundation for a competitive electricity market, where multiple suppliers can offer electricity to consumers.
“An independent operator can effectively connect buyers and sellers of electricity, which can lead to more efficiency and market-competitive prices,” Khan explained. “This move is expected to result in lower electricity prices in the mid-to-long term as power generators will be forced to offer better deals due to increased competition.”
Khan highlighted that ISMO would oversee the real-time operations of the electricity grid, balancing supply and demand to ensure a stable power supply. The introduction of multiple electricity suppliers—generators—will allow buyers, including power distributors and large consumers, to select the best rates, much like choosing an internet or mobile phone plan.
Efficiency Gains and Consumer Benefits
The transition to an independent multiplayer market under ISMO is expected to increase efficiency in electricity generation and transmission. This will lead to fewer power losses, reduced costs, and more reliable energy for consumers.
“With ISMO in place, electricity will be generated and delivered more efficiently, benefiting both consumers and the broader energy sector,” Khan said. He also emphasized that the introduction of competition would allow consumers more choices and the ability to secure better deals, which will likely drive down prices across the board.
As ISMO is set to be endorsed by the federal cabinet, its implementation marks an important step towards creating a modern, competitive energy market in Pakistan, with potential benefits for both consumers and the economy.
