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Analysis: China electricity price reform shambles ahead despite pressure of CPI

Wednesday, December 22, 2010 4:35 AM
This situation is not likely to change in short term unless government makes powerful and su bstantial moves concerning electricity price reform, such as launching

a bidding mechanism for on-grid electricity price, or separating tran smission and distribution electricity prices.

However, the Chinese government has carried out demonstra tion project for tiered pricing mechanism for electricity, which is co nsidered a heartening move towards electricity price reform.

Not breakthrough for China's electricity price reform in 2011-2015

Insiders believed that China's electricity price reform i s not likely to make a breakthrough but shamble ahead during the perio d of the 12th Five Year Plan (2011-2015).

Feng Fei, head of the industrial research division of the

Development Research Center of the State Council, said that electrici ty price reform is the core of resource products price reform. It does

not only concern structural changes in energy supply and consumption,

but also the changes in the structure of economic development.

Resource products price reform is supposed to form a pric e that could truly reflect the scarcity and supply demand for energy, which will eventually help to create a sound environment for the refor m of the structure and direction of energy development.

However currently, China's energy price is unable to mirr or the scarcity and supply demand for energy as well as the environmen tal costs, since China has not streamlined the price of coal, power, n atural gas and other energy, said Hua Jianmin, vice chairman of the St anding Committee of National People's Congress.

He also suggested promotion of power demand-management, a nd differential electricity prices for high energy-consuming industrie s.

In a research report on the development plan for power in dustry for the 12th Five Year Plan, the China Electricity Council (CEC ) suggested abandoning the idea of separating the transmission and dis tribution electricity prices since this make no progress towards break ing the monopoly in power transmission and distribution

The CEC suggested controlling losses in power generation and offering multiple choices for electricity consumers.

However, some power experts disagree. Han Xiaoping, a pow er expert, insists that China separate power transmission and distribu tion is the way forward. Since there is a serious shortage in investme nt in power distribution, it is unrealistic to have the State Grid to make all the required investment itself. Therefore, investment in loca l power distribution should be handled by local governments, which wou ld also be good for energy conservation and emissions reduction.

The CEC estimated that China's average electricity price is to rise 25.2 percent or the 142.7 yuan/GWh from 2010 to 710 yuan/GW h in 2015, and up further by 13 percent from 2015 to 802.2 yuan/GWh.

Ouyang Changyu, deputy secretary-general of the CEC, note d that the estimated electricity price rise is acceptable and will hav e much impact to inflation. But whether the electricity price will act ually change would be determined by the NDRC. (Edited by Li Xiaohui, l ixh@xinhua.org)

(Source: )
(Source: Quotemedia)

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