Nepra approves wheeling auction

ISLAMABAD: In a major step towards establishing a competitive electricity market, the National Electric Power Regulatory Authority (Nepra) has approved the Wheeling Auction Process and declared the Competitive Market Operations Date (CMOD) effective from January 22, 2026. In its determination, Nepra has directed the Independent System and Market Operator (ISMO) to immediately operationalise the auction process and initiate preparatory proceedings for issuance of the Request for Proposal (RFP), ensuring strict adherence to transparency, competition, and procedural fairness. Sharing details, Nepra stated that to facilitate a competitive price discovery mechanism for recovery of stranded costs under open access, the federal government amended Strategic Directive 87 of the National Electricity Plan and Rule 5 of the Eligibility Criteria (Electric Power Supplier Licences) Rules, 2023. These amendments, notified in August 2025, mandated the issuance of policy guidelines to address stranded costs arising from market liberalisation. READ ALSO: Wheeling: Power Division approves annual auction quantum for 800MW in 5 years Subsequently, the government approved the Framework Guidelines for Wheeling Auctions, 2025, notified on January 22, 2026. Under these guidelines, ISMO was required to submit an auction process for Nepra’s approval, which it did on January 28, 2026. Nepra then conducted a public consultation, issuing notices on February 18, 2026, and inviting stakeholder feedback. The Authority received comments from ten stakeholders, including chambers of commerce, distribution companies, and industry representatives. Several stakeholders termed the proposed 800MW auction quantum insufficient and recommended increasing it significantly to accommodate industrial demand. Suggestions were also made to lower the minimum load threshold of 1MW to allow broader participation. In response, ISMO clarified that the 800MW cap is an initial limit under the National Electricity Plan, which may be enhanced subject to market response. It added that the 1MW threshold aligns with global practices for wholesale markets and may be reduced at the retail stage. Stakeholders also raised concerns regarding lack of clarity on transmission and distribution node capacities. ISMO maintained that detailed connection studies would be conducted after the auction due to their technical complexity but assured that general guidance on network constraints would be provided through pre-bid briefings. On pricing, stakeholders cautioned against the absence of bid limits, warning of potential volatility. ISMO responded that the auction is designed for transparent allocation rather than revenue generation and that limiting bids was unnecessary. It also noted that bids would apply for one year only, reducing speculative risks. Nepra identified transparency in transmission node allocation as a key issue and amended the auction process to require that any limits imposed in the RFP must be supported by appropriate technical justification. The Authority also noted that a formal transmission node assessment study would not be completed until January 2027, which could create information asymmetry in the first auction. To address this, Nepra directed ISMO to publish an Interim Congestion Disclosure Note alongside the RFP, providing sufficient information on network constraints to enable informed bidding decisions. Additionally, ISMO, along with transmission and distribution companies, has been directed to conduct pre-bid technical briefings and publish their proceedings to ensure equal access to information. On governance, Nepra emphasised the need for neutrality of the Auction Committee and mandated conflict-of-interest declarations from all seven members prior to the auction. It rejected proposals for provincial representation and a separate grievance redressal body, citing potential conflicts and administrative delays. To further enhance transparency, ISMO has been directed to publish a post-auction summary outlining the evaluation process, number of bidders, quantum requested, and rationale for final allocations, subject to confidentiality constraints. Nepra concluded that Pakistan’s electricity market is in an early transitional phase and that the auction framework has been designed in line with local conditions rather than replicating mature international markets. With CMOD now effective from January 22, 2026, the Authority has instructed all relevant entities to complete their obligations within the approved timelines. ISMO has been directed to immediately proceed with implementation of the auction process in accordance with Nepra’s determination. Copyright Business Recorder, 2026

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