M. Siddique Ali Pirzada
Pakistan’s constitutional order underwent significant political decentralisation fol-lowing the Constitution of the Islamic Republic of Pakistan (18th Amendment) Act, 2010, reinforced further by fiscal redistribution through successive National Finance Commission Awards.
However, this constitutional transformation was not accompanied by a commensurate reconfiguration of the institutional architecture governing the electricity sector. As a result, while provinces acquired expanded constitutional and fiscal space, the electricity sector remained anchored in a centralised regulatory framework shaped by the institutional logic of the late 1990s.
This disjunction has produced an increasingly unstable condition of institutional duality. On one hand, a historically entrenched centralized regime persists, structured around federal regulatory authority, system-wide tariff determination and nationally coordinated fiscal exposure. On the other, an emerging decentralized governance layer is developing through provincial assertions of competence in energy planning and administration. The coexistence of these governance logics risks undermining policy coherence and the attainment of core national objectives, including affordability, reliability and long-term sustainability of electricity supply.
The foundational legal architecture of Pakistan’s electricity sector is established under the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 (NEPRA Act, 1997), which created the National Electric Power Regulatory Authority (NEPRA) as a unified federal regulator responsible for licensing, tariff determination and sectoral oversight across generation, transmission and distribution. The design of this framework reflected the political economy of its time, characterised by centralised planning, a single-buyer market structure and a uniform regulatory regime intended to ensure investment certainty, coordination and system stability.
The constitutional context shifted significantly following the 18th Amendment. Although electricity remained within the federal legislative domain, Article 157 of the Constitution of the Islamic Republic of Pakistan recognised provincial authority to construct powerhouses and grid stations, lay trans-mission lines and determine tariffs for distribution within the province, subject to federal policy and regulatory oversight. This produced a structural asymmetry in which political decentralisation ad-vanced more rapidly than regulatory adaptation, resulting in overlapping federal and provincial ex-pectations of authority.
This constitutional ambiguity has not been resolved through coherent legislative harmonisation. In-stead, it has generated overlapping jurisdictional claims and inconsistent policy trajectories, producing a persistent institutional grey zone. The Council of Common Interests (Article 153 of the Constitution) has functioned as a forum for mediating federal–provincial disputes in the energy sector, implicitly acknowledging provincial stakes in a federally regulated domain. Similarly, the Power Generation Policy 2015 created limited space for sub-national participation within a predominantly federal framework. By contrast, the National Electricity Policy 2021 reflects a renewed centralising orienta-tion, with limited recognition of autonomous provincial regulatory frameworks. These tensions have increasingly manifested in more explicit regulatory contestation. Emerging provincial energy governance initiatives, particularly in Sindh and Punjab, reflect growing sub-national aspirations to influence licensing frameworks, tariff structures, wheeling arrangements and bilateral contracting mechanisms. While these developments do not yet constitute fully consolidated parallel statutory regulatory regimes equivalent to NEPRA, they indicate a structural movement toward fragmented regulatory space within the federation.
This trajectory creates potential friction with NEPRA’s statutory mandate, as the system risks evolving toward overlapping or competing regulatory jurisdictions over identical market actors and infrastructure networks. Such fragmentation carries significant systemic implications. Electricity systems rely fundamentally on integrated transmission planning, coordinated dispatch, economies of scale and consistent regulatory signalling. Regulatory fragmentation increases transaction costs, elevates uncertainty, encourages regulatory arbitrage and weakens long-term investment planning by reducing policy predictability.
These concerns are further intensified by concurrent structural reforms in Pakistan’s electricity sector, including the planned privatisation and restructuring of distribution companies, the implementation of the Competitive Trading Bilateral Contract Market (CTBCM) and the development of integrated national energy planning frameworks. The success of these reforms depends critically on regulatory coherence. In the absence of a unified and institutionally consistent governance structure, reform efforts risk producing fragmented outcomes that dilute efficiency gains and undermine market development.
Addressing this challenge requires more than interpretive statutory clarification. It demands a deliberate alignment of constitutional allocation, regulatory jurisdiction and institutional responsibility. The central issue is not a binary choice between centralisation and decentralisation, both of which have comparative international precedents, but rather the creation of a coherent institutional architecture in which functional authority, fiscal exposure and regulatory competence are internally consistent.
Absent such alignment, persistent fragmentation is likely to generate allocative inefficiencies, distort investment incentives and impose fiscal and consumer burdens that extend beyond the electricity sector itself. Ultimately, the costs of institutional incoherence will be externalised onto households through higher tariffs and onto industry through reduced competitiveness. The longer this structural ambiguity remains unresolved, the greater the eventual economic and institutional cost of correction will become.
—The writer is a commentator on International and Comparative Law.
