Privatizing Yesterday’s Grid While The World Builds Tomorrow’s

Privatizing Yesterday's Grid While The World Builds Tomorrow's.

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• There is no commercial reason for the Administration to publish bidder-specific confidential information or commercially sensitive negotiations.

Why Pakistan needs electricity-market reform before it sells its strongest distribution firms.

Pakistan is preparing to privatize some of its electricity distribution firms at precisely the moment when the electricity business itself is undergoing the most profound transformation in a century. The need for reform is beyond dispute. Circular debt continues to grow, tariffs have become increasingly unaffordable, industrial competitiveness has deteriorated, consumers are moving rapidly towards rooftop solar and batteries, and the traditional utility model is under stress. The status quo cannot continue.

But the national debate is starting in the wrong place. It is focused on whether privatization is desirable when the more significant questions are what exactly is being privatized, what rights and assets are being transferred, what market the new owners will operate in, and whether the electricity sector is economically viable in its present form. Unless these questions are answered before final bids are invited and binding agreements are signed, Pakistan risks completing a transaction without completing a reform. Perhaps another IPP will happen with administration guaranteed returns and no market risk.

This distinction matters since privatization is not an objective in itself. It is only one instrument available to improve efficiency, governance, investment and service quality through market development and competition. The objective must be a financially sustainable and competitive electricity sector that provides reliable and internationally competitive power, supports industrialization and exports, integrates new technologies, protects consumers and creates incentives for investment rather than recurring bailouts. If privatization delivers those outcomes, it deserves backing. If it merely changes ownership while leaving the underlying market architecture untouched, the country may discover that it has privatized yesterday's grid while retaining yesterday's challenges. And the private sector will exact a cost as well as administration guarantees that will endanger the taxpayer. The Administration therefore has an opportunity to do something more ambitious than sell a number of firms. It can employ the process to redesign the sector around transparency, competition, flexibility, independent regulation and the emerging Future Grid. Notably, the decisions taken now will shape the value of the distribution businesses, the burden ultimately carried by taxpayers and consumers, and the ability of Pakistan's economy to compete for decades.

For context, the first difficulty is the absence of a sufficiently clear public description of the transaction. FESCO, IESCO and GEPCO are being advanced as the first major distribution-company privatizations. Advisers have been appointed, investors have been invited into the process and due diligence is proceeding. Yet the public record still does not provide a simple, comprehensive answer to the most basic question: what exactly will the buyer acquire?

Notably, a distribution firm is not merely a collection of poles, wires and transformers. It owns or controls grid stations, substations, control centres, offices, warehouses, workshops, training facilities, residential colonies, rights-of-way, communications systems, billing platforms and extensive customer information. It may additionally own strategically located land accumulated over decades. Some of that land is essential to network operation; some may be surplus; and some may possess commercial or redevelopment value far in excess of its current employ as utility property.

In practice, the treatment of that land is therefore central to valuation. Will it remain in the firm and pass to the purchaser? Will strategic and surplus properties be separated before sale? Will land remain in state ownership and be leased to the privatized utility? What happens to development rights if a substation is relocated or a depot becomes redundant? Will independent valuations be published, and will the public be able to see how real-estate value has been reflected in the transaction cost? These are not peripheral legal details. They determine what the taxpayer is transferring.

Meanwhile, the same uncertainty surrounds the commercial rights attached to the firms. The electricity business is changing rapidly. A future distribution firm may not earn its principal value merely by delivering centrally generated electricity to captive consumers. It may become an open network operator, a retail supplier, an aggregator of rooftop solar and batteries, an operator of electric-vehicle charging infrastructure, a provider of demand-response and flexibility services, a digital energy platform and a controller of valuable real-time customer and network data. If those rights are included in the transaction, the purchaser is acquiring much more than today's regulated distribution business.

Meanwhile, the matter becomes especially sensitive as sophisticated bidders cannot value these firms without detailed information on assets, liabilities, regulatory assumptions, employee obligations, litigation, land title, future commercial rights and the anticipated market structure. If bidders have been given material information that has not been placed in the public domain, the Administration should explain why Parliament, consumers, industry and taxpayers do not have access to the broad transaction architecture. If bidders have not been given such information, then it is tough to understand how credible valuations can be prepared. Either way, the current information gap weakens confidence in the process.

There is no commercial reason for the Administration to publish bidder-specific confidential information or commercially sensitive negotiations. But there is every reason to publish the structure of the transaction: what is being sold, what is being retained, how land is treated. It liabilities remain with the State, what future commercial rights accompany the sale and what regulatory obligations will bind the new owners. The public does not need to see every data-room document to understand the basic bargain being created in its name.

This is particularly significant as the strongest distribution firms may additionally have the greatest future option value. Their territories contain dense industrial and commercial loads, affluent residential customers, growing solar adoption and some of the strongest potential markets for batteries, electric vehicles and digital energy services. A valuation based only on today's regulated cash flows could therefore understate the long-term value of the franchise. Conversely, a buyer constrained to operate only a conventional wires business under rigid regulation may attach much less value to those future opportunities. Notably, the Administration must define the future business before it can credibly claim to have maximized the value of the sale.

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In practice, the broader principle is straightforward. Public assets should not be transferred through a process that is understood in detail by advisers and bidders but only in outline by the public that owns them. Transparency is not an obstacle to privatization. It is the foundation of a transaction that can survive political change, legal scrutiny and future technological disruption. Privatization Cannot Fix a Broken Market.

For context, the second matter is more fundamental. Even a perfectly transparent transaction cannot succeed if the market into which the firms are sold remains structurally flawed. Pakistan's electricity crisis is often presented as a failure of public ownership, implying that private ownership will automatically produce a viable sector. That diagnosis is too convenient.

In practice, the sector reached its present condition since the policy framework rewarded investment more than efficiency, capacity more than productivity, administrative regulation more than competition and construction more than market development. Changing ownership without changing that framework risks treating symptoms while leaving the disease intact.

This is why the future role of NEPRA should be at the centre of the privatization debate. Investors are not buying unregulated commercial firms. They are buying businesses whose revenues, investment recovery, quality obligations, allowed returns and competitive position depend overwhelmingly on regulatory decisions. Tariffs, capital expenditure, performance targets, open access, supplier choice, network charges, distributed generation and consumer protection all sit within the regulatory framework. Notably, the economic value of the business is inseparable from the quality of the regulator.

Pakistan's experience with the IPP model should be treated as a warning. Private investment itself was not the difficulty. Pakistan needed generation and private investors responded rationally to the incentives offered. The deeper failure was that the broader market did not evolve alongside private generation. Governments accepted extensive protections against political risk, exchange-rate movements, demand uncertainty and payment risk since the immediate priority was to attract capital and add capacity. Over time, those protections accumulated into a system in which consumers became the residual bearers of risk. Mir Zaman's War: A Subaltern Memoir Of World War 2 From Taxila.

Capacity obligations rose, the rupee depreciated, demand forecasts proved optimistic, transmission expansion lagged and distribution losses persisted. The regulatory system increasingly discovered itself allocating and recovering these costs rather than creating mechanisms to reduce them through competition and productivity. The result was not simply an IPP difficulty; it was a market-design challenge reinforced by regulatory weakness and, at times, the appearance of regulatory capture in which the survival and guaranteed returns of incumbent participants received greater protection than the competitiveness of consumers and industry.

This history matters since privatization can repeat the same error in a new form. A private monopoly operating under an unchanged regulatory philosophy does not necessarily serve consumers better than a public monopoly. It may improve collections, reduce theft and invest more effectively, but if the regulatory structure continues to socialize system costs and preserve administrative pricing, consumers may simply face more efficient collection of an inefficient tariff.

Notably, the current Competitive Trading Bilateral Contract Market is a step toward competition, but it is being introduced into a system heavily encumbered by long-term contracts, legacy capacity obligations and administrative arrangements. Genuine competition cannot flourish if most generation has already been committed and if new market participants cannot freely access networks, choose suppliers and discover rates through transparent trading. CTBCM should therefore be treated as an opening rather than the end-state.

Meanwhile, the Administration should state clearly whether privatized DISCOs will remain integrated distribution-and-supply monopolies, become neutral wires businesses with open access, compete as retailers, or participate in a phased transition that separates network operation from energy supply. Each structure has different implications for valuation, incentives and consumer welfare. Selling the firm first and deciding the market structure afterwards is precisely the sequencing mistake Pakistan should avoid.

For context, the same applies to NEPRA. Privatization should be accompanied by a redesign of regulation around outcomes rather than cost pass-through. Performance-based regulation should reward lower losses, higher reliability, faster connections, improved service, innovation and efficient capital deployment. The regulator should protect consumers from monopoly power while giving investors predictable rules and a credible route to earn returns through performance rather than guaranteed recovery of every cost.

Without that shift, privatization risks becoming another chapter in the same story: contracts are optimized, investors are protected, ownership changes, but the electricity market remains unable to deliver internationally competitive power. The reform must therefore commence with the market and the regulator, not end with them. Selling the Strongest Businesses While Retaining the Weakest Liabilities.

Meanwhile, the third matter is the sequencing of privatization itself. The Government's logic for starting with FESCO, IESCO and GEPCO is understandable. These firms have relatively lower losses, stronger recoveries, better customer profiles and more attractive commercial territories than a number of other DISCOs. They are easier to sell and probable to generate greater investor interest.

But what is convenient for completing a transaction is not automatically optimal for the taxpayer. The stronger firms are precisely those that are best placed to generate future value. Their customer bases include major industrial, commercial and high-income residential demand. Their network economics are better. Their collection records are stronger. Their territories are probable to be among the earliest markets for electric vehicles, batteries, distributed generation and sophisticated energy services.

Meanwhile, some of the weakest distribution firms remain with the State. HESCO, SEPCO, PESCO and QESCO continue to carry higher losses, weaker recoveries, governance challenges and greater dependence on public backing. If the best franchises are privatized while the weakest liabilities remain in public hands, Pakistan risks socializing the losses while privatizing the upside.

This concern extends beyond distribution. The public sector continues to carry the financial consequences of legacy generation assets and sizeable ongoing projects. Neelum-Jhelum was intended to be a flagship source of low-cost hydropower, yet delays, cost escalation, technical failures and repeated shutdowns have turned it into a major public-sector burden. Whatever the engineering causes, the liability remains with taxpayers and electricity consumers.

Dasu is strategically significant and could eventually provide valuable low-cost hydropower, but the project additionally represents a sizeable future financial commitment. Delays, cost escalation and financing needs must be considered against the structure of the electricity market into which the project will be commissioned. If grid demand continues to grow gradually while rooftop solar and storage expand swiftly, Pakistan could again add sizeable centralized capacity to a system already struggling to absorb and pay for existing obligations. The difficulty is not that hydropower is undesirable; it is that generation planning has too often been detached from demand, transmission capability and market reform.

These public liabilities do not disappear when a DISCO is sold. Capacity payments remain. Circular debt remains. Subdued DISCOs remain. Public hydropower obligations remain. The State may therefore sell some of the sector's healthiest cash-generating franchises while retaining a disproportionate share of yesterday's financial mistakes.

That outcome may still be defensible if the Administration can demonstrate that privatization of the stronger businesses creates enough value, efficiency, investment and demonstration effects to improve the entire sector. But that case must be created explicitly. It should not be assumed. The public should see the analysis comparing alternative sequences: privatizing solid businesses first, restructuring subdued businesses first, using management contracts or concessions, separating wires from supply, or creating regional combinations that spread risk. Pakistan's Dr. Hina Velji Secures Historic Seat On WAGGGS World Board.

There is additionally a political-economy concern. Pakistan's privatizations have often been criticized for concentrating valuable public assets in the hands of a small number of already powerful business groups. The electricity networks are particularly sensitive since they are natural monopolies with substantial customer franchises, strategic land and potentially valuable future digital rights. If the process is not transparently competitive and carefully regulated, privatization could deepen concentration of economic power rather than create competition.

Notably, the objective should not be to enrich existing conglomerates by transferring scarce public franchises at valuations based on yesterday's business model. Nor should the objective be to retain inefficient public monopolies indefinitely. The objective should be to create competitive markets, broaden participation, attract new technology and capital, and ensure that gains from efficiency are shared with consumers and the economy.

This again points back to transaction design. The Administration should disclose bidder qualification criteria, competition safeguards, limits on cross-ownership where necessary, treatment of related-party transactions and mechanisms to prevent a privatized monopoly from becoming an entrenched private rent. A successful sale is not measured by how rapidly an asset changes hands. It is measured by whether the post-privatization market becomes more competitive, productive and accountable. Notably, the Future Grid Has Already Arrived.

Meanwhile, the fourth matter is technological. Pakistan is attempting to privatize conventional electricity distributors just as the traditional utility model is being disrupted by rooftop solar, batteries, electric vehicles, digital platforms and artificial intelligence. The World Economic Forum and leading international energy institutions increasingly describe the future grid not as a passive network of wires but as an intelligent platform coordinating millions of distributed assets in real time.

In that system electricity no longer flows only from sizeable power stations to passive consumers. Homes generate electricity. Commercial buildings store it. Factories adjust demand according to rates. Electric vehicles become mobile batteries. Batteries provide balancing and ancillary services. Artificial intelligence optimizes generation, consumption and storage continuously. Consumers become producers and traders. For context, the distribution network becomes the platform through which all these activities interact.

Connectivity therefore becomes the defining asset. The most valuable part of a future utility may not be its physical network alone, but its relationship with millions of customers, access to real-time data, communications infrastructure, software systems and ability to coordinate distributed resources. This is why the question of future commercial rights is inseparable from privatization value.

For now, privatizing Yesterdays Grid While The World Builds Tomorrows remains the part of the story worth watching, and further updates are likely as more details are confirmed.