Abstract
Pakistan started its electricity market reforms process in 1998 whereby WAPDA Act was passed with the objectives to achieve operational, financial and managerial efficiencies by reducing electricity price-cost margins, system losses and sectoral price differences with enhanced private sector investment in electricity generation, and better utilization of existing generation capacity. However, despite these reforms in place, Pakistan’s electricity market is still marred with issues including widening demand and supply gap, high operational and financial losses, circular debt, lack of operational capacity and inadequate generation capacity. This study has thus empirically investigated the impact of structural reforms on electricity market outcomes in Pakistan. Five different models in static and dynamic settings have been estimated for the period of 1980 to 2016 under ARDL framework. The estimation results indicate that the electricity market reforms had limited success as the reforms largely remained ineffective at impacting the performance indicators except for IPPs, capacity utilization and transmission and distribution losses in selected dimensions of the market performance. We recommend the policymakers to introduce more reforms for enhancing the efficiency of the electricity market. The role of government in the decision-making process should be minimized by empowering the regulatory body for creating competition among different market players.