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Issue 1 2014(March Edition)

Tariff reform brings more transparency to power sector

Source:      Date:2015-03-12      Editor:Tracy     

The National Development and Reform Commission last week announced detailed plans for its first pilot plan for electricity transmission and distribution tariff reforms in Shenzhen, a move seen as a breakthrough for the world's largest electricity consume. The top price regulator also announced a separate pilot plan in the Inner Mongolia autonomous region. The reform will change the financial model of power grids.

At present, their profits come from the difference between on-grid and retail tariffs. Instead, the NDRC will oversee their gross revenue. Analysts expect this change to have a significant impact on their profits. China drew up a comprehensive electricity reform plan a decade ago, but much of that plan was not implemented as planned for a variety of reasons, such as electricity shortages and monopoly conditions in parts of the industry. Tariff reform constitutes a breakthrough that will restart the process of change by increasing the transparency and efficiency of the power sector and introducing market forces. The NDRC said tariff reforms aimed at fostering a competitive market will benefit all parties in the long run.

Officials said that T&D tariff reform will be promoted in more regions "at a pace faster than expected”. The new electricity tariff mechanism took effect on Jan 1.Accurate.

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