The reforms behind the "one cent" — an overview of progress in reforming our electricity system
On august 7 in beijing, xinhua network (journalist chen xiaowei, ning ding bin, wu ying ting) this year, the electricity grid in shenzhen city dropped by more than a cent over last year's price。
The region's “one cent” cannot be underestimated. It marks a substantial step forward in the piloting of the price reform for electricity transmission and distribution in the country, which is opening the way for a new wave of institutional reform of electricity。
With the publication of the opinions on further deepening the reform of the electricity system in march of this year and the expansion of the pilot of the subsequent reform of transmission and distribution prices, the country's new cycle of institutional reform is on the move and has begun to show results。
Let's remodel and go
In march this year, when a programme known as “document no. 9” was launched, it became the focus of attention in the field of energy. This is the opinions on further deepening the institutional reform of electricity issued by the cpc central and state council. It is precisely because of its far-reaching implications for the process of reforming our electricity system。
In 2002, the state council issued the electricity institutional reform programme, which opens the “downlight” of the electricity institutional reform. The programme clearly states that the overall objective of the reform is to break down monopolies, introduce competition, increase efficiency, reduce costs, improve the mechanism of electricity prices, optimize the allocation of resources, promote power development, promote national connectivity and build a system of government-supervised electricity markets that are free, competitive, open and well developed。
As a result of this campaign, the electricity sector broke out of the institutional constraint of exclusive electricity and initially developed a diversified pattern of competition among electricity market owners。
“the reforms of the last 13 years, which have effectively contributed to the development of the electricity industry, increased the level of universal electricity services, created an initial market-based system and improved electricity pricing mechanisms, have accumulated valuable lessons for further reforms.” the director of the advisory centre for research on the energy and electricity economy of the university of electricity in north china has spoken。
At the same time, however, there are contradictions and problems in the development of the electricity sector. Among them, the absence of a trading mechanism and the fact that market-based pricing mechanisms have not yet been fully developed continue to highlight the fact that the decisive role of market allocation of resources is not being fulfilled, energy-efficient environmental units are not being fully exploited, and water, wind and light disposal is occurring. In addition, the current price management of electricity continues to be dominated by government pricing, and the adjustment of electricity prices tends to lag behind cost changes, making it difficult to reflect in a timely and rational manner the cost of electricity use, market supply and demand, resource scarcity and environmental protection expenditures。
In the context of the intersection of old and new contradictions, the introduction of “doc. 9” is a “timely rain” for the industrial development and reform process, precisely to rationalize price formation mechanisms and gradually break monopolies。
The overall thrust of the “doc. 9” can be summed up as “the three free, one independent, three strong”. The “three liberalization” is based on further improvements in the separation of government enterprises, the separation of the plant network and the separation of the support services, the orderly liberalization of competitive chain electricity prices other than distribution, the orderly liberalization of distribution services to social capital, and the orderly liberalization of distribution schemes other than those that are public goods and regulatory. “one independence” means the promotion of the relative independence of the trading institution and the regulation of its operation. “three enhancements” are the further strengthening of government regulation, further enhancement of integrated electricity planning and further enhancement of the safe and efficient operation and reliable supply of electricity。
“this reform programme is quite pragmatic, it's a `upgrading' of electricity.” the vice-researcher of china's international economic exchange centre (cietc) zheng chunmei said that this was in line with the 2002 programme from the perspective of retrofitting energy commodity attributes, building competitive market structures and systems。
The reform behind "one cent" meant
Since 1 february this year, the market price adjustment in shenzhen has reduced commercial electricity prices by an average of 8. 43 cents each, to a certain extent reducing the burden on businesses in shenzhen, such as businesses and services。
The “dividend” of lower electricity costs is precisely the result of institutional changes in electricity。
In october last year, the national development reform commission launched a pilot reform of the shenzhen city's electricity transmission and distribution prices to promote the establishment of an independent system of transmission and distribution prices. Under the new price mechanism, the grid enterprise profitability model was changed from the original “purchase-sale differential” model to the “allowing cost plus reasonable gain” model, allowing for strict approval of costs and benefits by the government regulatory authorities。
At the beginning of this year, the national development reform commission (ndrc) renewed the revenue and distribution prices for the first regulatory cycle of electricity grid transmission and distribution in shenzhen city. In 2015, the electricity grid in shenzhen city dropped by 1. 23 points per kilowatt-hour (kwh) from 0. 155 in 2014。
Don't underestimate the "one cent." according to the 2014 sales of electricity in shenzhen city, the price reduction of the transmission chain would amount to 900 million yuan, a reform that would also benefit electricity users through the sale of electricity prices。
However, the significance of the price reform for transmission and distribution is not limited to the decline in electricity prices。
The electricity system consists of four components: electricity generation, transmission, distribution and distribution, and electricity sales, if broken down according to the upstream/downstream chain, which also results in internet access prices (prices for the grid to purchase electricity from the power generation company), distribution prices (prices for the transmission and distribution chain) and sales prices. If electricity prices are central to the reform of the electricity system, then transmission and distribution prices are the most critical part of the reform。
"the idea behind the price reform is to `take care of the middle and let go of both'." cheng chunmei stated that competitive operations were to be liberalized in the chain of the electricity industry and that the pattern of “multi-buy-and-sale” was to be developed on both the generation and the sale of electricity. Without the independence of the price of transmission and distribution, it would be difficult to liberalize the “two sides” and to develop a market-based mechanism of electricity prices。
“this pilot reform of transmission and distribution prices, which regulates the revenues of grid enterprises in accordance with internationally accepted nuclear price methods, marks a shift in the way we regulate grid enterprises.” it was recalled that the establishment of an independent, standardized transmission and distribution pricing mechanism and the introduction of a cost-plus-revenue control approach to grid transmission and distribution operations had freed grid enterprises from the uncertainty that the current purchase and sale differentials created transmission and distribution revenues, focusing more on network asset operation and upgrading transmission and distribution services。
It's going deep
At the beginning of june this year, the national development and reform commission (ndrc) renewed the pilot programme for the reform of electricity grid transmission and distribution prices in western inner mongolia, and the idea of “allowing cost plus reasonable gain” for approved transmission and distribution prices coincided with the shenzhen pilot。
The director of the institute of economic research of the institute of social sciences of inner mongolia said that exploring the western nepalese electricity grid to establish an independent system of transmission and distribution prices, improving the system of regulation and regulation of transmission and distribution prices, and establishing a system of regulation and incentives for the cost of electricity grid enterprises could contribute both to improved management and efficiency of grid enterprises, as well as to building experience in the reform of distribution and distribution prices in other regions, and to the scientific, normative and institutionalization of the regulation of transmission and distribution prices in the country。
On the basis of the shenzhen-monsi pilot, four provinces of anhui, hubei, ningxia and yunnan have been included in the pilot scope for the reform of forward transmission and distribution prices。
At the same time, in order to further advance the price reform of transmission and distribution, the national development reform commission and the national energy authority jointly issued the cost-priority review scheme for transmission and distribution (pilot). This is also our first cost-monitoring approach for super-networked natural monopoly industries, marking a new phase in the overall scientific and institutional regulation of state regulation of the cost of grid enterprises。
With the price of transmission and distribution reform as the entry point, the reform of the electricity system will also move further。
As previously described by wang qiang, inspector general of the department of physical reform of the national development and reform commission, the reform of the electricity system is a systemic project that needs to be carried out in an orderly, effective and sound manner on the basis of consensus. Following the introduction of the programme, the development of reform-related policy packages has been actively studied; pilot reform programmes have been developed to protect against the risks of reform; and the road to reform implementation has been progressively explored through piloting in the areas of electricity price reform, market systems, the liberalization of the distribution side, investment in incremental distribution services and new energy development。
