🔳 Pakistan Power Sector Marks a Major Milestone as NEPRA Grants Distribution Licence to DHA Energy
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DHA Energy is being regarded as the first example of Pakistan’s new model of licensed private electricity distribution companies.
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The licence marks a significant step towards introducing private electricity distribution companies (Micro-DISCOs) into Pakistan’s power sector.
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If the model proves successful, other major private developers, industrial estates such as Sundar Industrial Estate, and large commercial zones could also obtain their own distribution licences, substantially reducing reliance on state-owned DISCOs and fostering a more competitive electricity market.NEPRA’s decision has raised hopes that the entry of private distribution companies will improve electricity procurement, reduce line losses, and gradually ease the burden of capacity payments, Return on Equity (ROE), and IPP-related costs that are ultimately passed on to consumers. If similar companies are established across different regions and sectors, electricity consumers could benefit from significantly lower power bills.“روشن کہیں بہار کے امکاں ہوئے تو ہیں۔”(Perhaps the first signs of spring are finally beginning to emerge.)🔺 Public Research Series | Episode 44Topic: How Can Pakistan’s Electricity System Be Fixed?Title: Is Pakistan’s Government Monopoly over Electricity Distribution Finally Coming to an End?🔺 When public institutions are reluctant to disclose the facts, the pursuit of truth becomes a public responsibility.Research & Writing: Syed ShayanPakistan’s power sector and its traditional electricity distribution system have entered a significant new phase. The National Electric Power Regulatory Authority (NEPRA), Islamabad, has granted a formal electricity distribution licence to DHA Energy Supply Company (Private) Limited.Under Licence No. DL/11/2026, issued on 24 July 2026, the company has been authorised to distribute and supply electricity within its designated service area for the next 20 years, until 30 September 2046.DHA Energy was incorporated on 2 March 2017 under the Companies Ordinance 1984 and the Companies Act 2017, with Corporate Registration No. 0106300. The licence has been issued under Sections 20 and 21 of the NEPRA Act, 1997.The licence has been granted on a non-exclusive basis. This means that traditional government-owned distribution companies such as LESCO and K-Electric will no longer enjoy exclusive rights within the licensed area. Instead, the licence introduces competition into the electricity distribution market, helping reduce monopolistic practices, improve service quality, and enhance operational efficiency for consumers.The licence is also aligned with NEPRA’s broader electricity market reforms under the Competitive Trading Bilateral Contract Market (CTBCM) framework, which aims to gradually transform Pakistan’s electricity market into a more competitive environment.The issuance of this licence forms part of NEPRA’s broader CTBCM reform programme. The primary objective of CTBCM is to preserve the existing electricity network while gradually introducing competition into the buying and selling of electricity. Under this framework, eligible Bulk Power Consumers with electricity loads of 1 MW or above—including large industrial facilities, industrial estates, data centres, major commercial complexes, and large housing developments connected through a single point—will gradually no longer be required to purchase electricity exclusively from their local distribution company. Subject to NEPRA’s regulations, they will be able to enter into electricity supply agreements with any licensed supplier, while the electricity itself will continue to be delivered through the existing transmission and distribution network.For decades, electricity distribution in Pakistan has remained largely confined to ten government-owned distribution companies and K-Electric in Karachi. However, rising line losses, electricity theft, poor billing practices, and weak revenue recovery have clearly demonstrated the need for fundamental reforms in the existing system.Against this backdrop, NEPRA’s decision to grant a distribution licence to DHA Energy Supply Company represents an important and welcome development. It marks the beginning of a transition away from the traditional monopoly model, under which the private sector had little opportunity to participate meaningfully in electricity distribution.Our think tank has consistently recommended the gradual removal of the monopoly enjoyed by government-owned distribution companies and the introduction of licensed private distributors responsible for electricity distribution, billing, and revenue collection within clearly defined service areas. Companies operating in smaller service territories are often better positioned to control electricity theft, reduce line losses, and deliver higher-quality services to consumers.Following the installation of more than 100 Independent Power Producers (IPPs), Pakistan’s next major challenge is no longer electricity generation alone, but ensuring that the electricity already being produced reaches consumers through a more efficient, transparent, and accountable distribution system. Opening the distribution sector to private participation is therefore an important step in the country’s broader power sector reform agenda.The fundamental objective of NEPRA’s Competitive Trading Bilateral Contract Market (CTBCM) framework is to replace monopoly with competition, enabling qualified consumers and communities, over time, to choose their preferred electricity supplier and distributor. The issuance of DHA Energy’s distribution licence represents an important milestone in implementing this reform policy.Although several housing developments have historically managed their own internal electricity systems, DHA Energy’s emergence as a formally licensed electricity distribution company under NEPRA signals a significant policy shift. It suggests that major private developers may increasingly choose to operate as licensed Micro-DISCOs, rather than relying entirely on traditional government-owned distribution companies.However, this transition also presents important regulatory challenges. If commercial and residential areas with high electricity consumption and nearly 100 percent bill recovery gradually move away from traditional distribution companies and begin operating under private distributors, the revenue base of utilities such as LESCO, FESCO, IESCO, and K-Electric could be adversely affected.For this reason, the transition must be implemented gradually under a clear and carefully designed regulatory framework.This development could also encourage other major private housing developers, commercial projects, and industrial parks to seek permanent electricity distribution licences from NEPRA. As a result, competition within the electricity distribution sector is likely to increase, paving the way for the gradual dismantling of the longstanding monopoly.To fully appreciate the significance of this reform, it is important to understand the difference between a monopoly system and a competitive market.Under the traditional monopoly model, only one distribution company was authorised to provide electricity services within a particular area. Consumers had no alternative service provider. This is what is commonly known as a monopoly.Under the emerging competitive market model, additional licensed companies will be permitted to participate in electricity distribution. This is expected to encourage competition in customer service, billing accuracy, fault response times, operational efficiency, and the adoption of modern technologies.In simple terms, a monopoly allows only one company to operate, whereas a competitive market enables multiple qualified companies to compete in serving consumers.(To be continued in the next episode.)
