The government has announced plans to introduce a new electricity pricing system to address problems within the electricity sector.

The new system will be launched later this year, according to a briefing provided by the Secretary of the Power Division to the Senate Standing Committee on Power, Express News reported.

Currently, electricity is purchased by the Central Power Purchasing Agency (CPPA) and sold to Distribution Companies (DISCOs), a system that has presented several operational challenges.

Under the new plan, a new body, the Independent System Market Operator (ISMO), will be established to regulate electricity trading. This body will be formed by merging the National Transmission and Dispatch Company (NTDC) and CPPA, which will streamline operations and reduce inefficiencies, the power minister said.

In a bid to overhaul the sector, the government will also privatize GENCOs (generation companies) and DISCOs, and NTDC will be split into three separate companies.

The restructuring aims to improve performance and modernize the transmission infrastructure.

The secretary added that all future electricity projects will be planned with a focus on reducing costs, and any additional expenses will be borne by the federal or provincial governments, not consumers.

The electricity sector reforms also include the development of a 10-year transmission plan, which will be aligned with the production plans.

The secretary mentioned that NTDC’s board of directors, headed by Dr. Faiz Chaudhry, would work on the reforms with recommendations expected in March 2025.

In addition, the Power Division is taking steps to reduce electricity tariffs, with significant reductions expected by June 2025.

The proposed reforms were met with some skepticism from lawmakers.

Senator Shibli Faraz expressed concern over NTDC’s performance, noting that it has been functioning without a permanent chief for years. He also questioned the government’s ability to lower tariffs given the high cost of electricity.

Senator Mohammad Akram suggested that the government should address the increasing shift towards solar energy that many citizens are adopting due to high electricity costs.

In response, the secretary assured that the government is fully focused on addressing these challenges and that a reduction in electricity tariffs will be pursued in the coming months.

The government is also keen to improve efficiency and limit system losses, which have contributed to the financial strain on the energy sector.

The new electricity market system is part of Pakistan’s wider strategy to tackle issues in the electricity sector, including inefficiency, high costs and the growing shift to renewable energy sources.

The government is optimistic that these reforms will lead to a more sustainable and cost-effective energy future for the country.