DISCO Privatisation Will Not Cut Power Bills Yet

DISCO privatisation will not bring cheaper electricity right away, even though the government has proposed a new two-tier model for selling the power distribution companies.

The plan separates ownership of the distribution network from the business of selling electricity. One private investor would own the poles, wires and other physical assets. Other private companies would then compete to buy and sell electricity to consumers.

Over the medium and long term, that competition could create room for lower tariffs. In the short term, however, consumers would keep paying the same capacity charges. Those charges, about Rs17 per unit for power generation capacity that goes unused, stay in place under the proposal.

How the two tiers of DISCO privatisation would work

Under the first tier, a successful bidder acquires ownership of a distribution company’s physical infrastructure. The government would regulate this infrastructure owner, which would also serve as supplier of last resort. That means it would keep supplying customers who do not switch to a competing supplier.

Under the second tier, competitive suppliers enter the market. They handle electricity procurement, sales, billing and collections. They acquire generation capacity and customer portfolios through competitive auctions rather than buying infrastructure.

The proposal initially covers Faisalabad, Gujranwala and Islamabad distribution companies, known as FESCO, GEPCO and IESCO. It remains subject to approval from the Power Sector Reforms Steering Committee and the federal cabinet.

A Privatisation Commission official said the objective is to keep distribution infrastructure regulated while opening procurement and sales to competition.

What changes for the single buyer

The arrangement would end the Central Power Purchasing Agency’s role as the sole buyer of electricity. Multiple private suppliers would take its place.

After FESCO is privatised, the CPPA would auction FESCO’s allocated generation capacity and customer portfolio to private suppliers. Competitive suppliers would also bear capacity payment obligations from existing power generation agreements, allocated by their share of consumption.

The government estimates that consumers currently bear about Rs1.7 trillion a year in capacity payments. The model aims to transfer these obligations to private suppliers, along with the capacity and customer portfolios.

That transfer is the key point for households. The bill does not fall just because the owner changes. The capacity charge moves from one payer to another, and consumers keep paying it through the tariff until the underlying agreements change or competition squeezes the rest of the bill.

Where the sales stand

The three companies in the first batch serve more than 14 million consumers. The government invited investors in May 2026 to buy between 51 percent and 100 percent of each company, with management control.

None of the three has been sold yet. In an interview, Privatisation Commission Chairman Muhammad Ali said the government was aiming to hold bidding for the three in the first quarter of 2027. He also said Pakistan plans to privatise nine distribution companies by December 2027.

The same interview confirmed the shape of the reform. Privatised companies would serve as suppliers of last resort, and consumers would eventually be able to choose among competing suppliers offering different tariff packages.

Tariffs will still be set through the regulator, NEPRA, and notified by the government. Reports on the process say the uniform tariff for the whole country will continue after the sales, so customers of a privatised company pay the same notified tariff as customers of state-owned companies.

Feature Pakistan has followed the process closely. The three DISCOs in the first batch carry assets valued at about Rs624 billion, and smart meters are planned to curb theft and overbilling. Service problems remain visible in the meantime: IESCO has announced loadshedding in five cities, and Lahore has faced power cuts after Tarbela units went offline.

The wider energy picture matters too. Pakistan recently rejected expensive LNG cargoes, which shows how tightly fuel costs feed into the same bills.

Frequently asked questions

Will DISCO privatisation cut my electricity bill?

Not immediately. Consumers will keep paying about Rs17 per unit in capacity charges for unused generation capacity, so bills are unlikely to fall in the short term.

What is the two-tier privatisation model?

One private investor owns the distribution network, regulated by the government, while competing private suppliers buy and sell electricity to consumers.

Which DISCOs are being privatised first?

FESCO, GEPCO and IESCO, serving Faisalabad, Gujranwala and Islamabad. The proposal still needs approval from the Power Sector Reforms Steering Committee and the federal cabinet.

What happens to the CPPA?

Its role as the sole buyer of electricity would end. Multiple private suppliers would buy generation capacity and customer portfolios through competitive auctions.

How large are capacity payments?

The government estimates consumers bear about Rs1.7 trillion a year in capacity payments, which the model aims to transfer to private suppliers.