China is likely to reform the electricity transmission and distribution pricing mechanism for 10 more provincial power grid and one or two regional power grid operators or more in 2016, reported Xinhua-run Economic Information Daily Tuesday. In China, electricity transmission and distribution pricing is decided by China's top economic planner - the National Development and Reform Commission (NDRC), while some localities were nodded to pilot more market-based pricing of electricity transmission and distribution.
Electricity transmission price is the price at which a power grid operator buys electricity from power plants and the electricity distribution price refer to prices at which a power grid firm sells electricity to its customers. Currently, Shanxi, Tibet, and Jiangxi have submitted their applications on piloting the electricity transmission and distribution pricing reform and China is expected to expand the reform to the whole country in 2017, according to the newspaper. However, even localities already piloting the electricity transmission and distribution pricing reform such as Shenzhen, west Inner Mongolia, Anhui, Hubei, Ningxia, Yunnan and Guizhou face some tricky issues, say industry experts. For instance, power grid operators in pilot areas are generally too optimistic about local electricity consumption growth and resort universally to reduction of electricity transmission and distribution prices to spur local economy.
Under such circumstances, it is inevitable for them to suffer imbalanced incomes and operating expenditures, in particular after they add power grid investment on expectation of growing electricity distribution. If their accounts of electricity purchasing and sales record higher than six percent losses, they shall adjust their prices of electricity transmission and distribution, suggest industry experts.
In addition to the pilot reform on electricity transmission and distribution pricing, NDRC also urged the pilot areas to formulate reform plans and other areas to survey and get full knowledge of their electricity transmission and distribution prices. In December 2015, unified monitoring and appraising of electricity transmission and distribution costs in the pilot areas had been completed and allowed revenue and price levels would be fixed down in accordance with their expenditures, fixed-assets and sales incomes in this regard after exchanging opinions with relevant parties.
As the present monitoring and appraisal results tell, these activities prove effective in cutting costs for power grid operators as write-down of fixed-assets are prolonged and such fees irrelevant to the power system are removed and the focus of following work is to expand the pilot reform, calculate reasonable electricity transmission and distribution prices, press ahead with the cross-subsidy policy and decide transitional period policies, discloses an insider.
In 2016, provincial electricity transmission and distribution prices approving and deciding measures will be mapped out in China, after summarizing experience learned from the pilot areas. So far, an application for pilot power system reform of Shanxi already submitted to the NDRC in early December 2015 is inviting public comments.
What's more, Tibet is also mulling piloting the power system reform. It is disclosed that relevant authorities think separated power plants and grids can facilitate its exploration of classified reform, study on new cross-subsidy mechanism, and create conditions for direct electricity purchase by big power users.
In Jiangxi, the Jiangxi Development and Reform Commission has applied to NDRC for starting electricity demand-side reform and energy management mechanism innovation pilots and public opinions about the plan is being solicited in the province.
In Zhejiang, its recently publicized plan on demonstrating clean energy consumption during 2016-2017 also proposed to orderly push forward electricity transmission and distribution pricing reform and appraising of electricity transmission and distribution prices will be finished before 2017. Besides, Shaanxi, Hunan, east Inner Mongolia, and Fujian are also applying for participation in the pilot electricity transmission and distribution price reform.
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