Reform of electric power system is worth expecting
The reform of electric power system has entered a deep water zone. The 2015 reform of electric power system is worth watching. Upon approval by the National Development and Reform Commission, Shenzhen is officially putting reform of transmission and distribution power price into practice, during which the commercial electricity price of Shenzhen has dropped 0.083yuan that is higher than that of other areas of Guangdong province. The commercial electricity price is basically the same with industrial electricity price, and the annual reduction amount is 1.299 billion yuan, while the industrial electricity price and residential electricity price have remained unchanged.
The commercial electricity price is higher than residential electricity price, so to reduce commercial electricity price will not only benefit development of small and micro businesses, commerce and service industry, but also will reflect fairness. The reason for why not to reduce residential electricity price is that currently the average cost for Shenzhen residential electricity consumption is 0.87yuan per kilowatt hour and the actual price is 0.68 yuan due to various kinds of subsidies. As a result, the residential electricity price remains unchanged in this round of electricity price reform.
After this round of reform, currently China has five largest power generation groups, and there are also many large-scale power generation enterprises at different places, so the competition is intense. However, it’s a pity that the monopoly of power grid has in return greatly rebated the competitive bidding and power supply. The reform will be carried out to a deeper degree and step by step. The pilot project of Shenzhen this time can be regarded as start of a new round of electric power system reform for it is implementation of marketization at grid purchase price and selling power price. While the power grid that causes price gap always through administrative monopoly ordering grid purchase price and selling price has changed into the pricing mode of “allowing cost and reasonable income”, to gain power transmission and distribution income. Under this mode, the government, based on power grid asset, directly supervises the power grid’s reasonable cost and income in all dimensions, then directly determine power transmission and distribution price and publish transmission and distribution electricity price level within the supervision period in advance, in order to guide reasonable investment, and establish and improve cost constraint and incentive mechanism.
Through this kind of method, the grid purchase price and sale price and price gap will bear no relationship with power grid, and the power grid enterprises will truly rely on collecting power transmission and distribution fee to gain incomes. When the power grid has no benefits contest with the power generation and selling enterprises, there will be public benefit gradually arising from monopoly of the power grid. More importantly, it will squeeze the power grid’s unjustifiable super profit.
However, this kind of mechanism still has room for improvement. Theoretically, when it is lower than the cost allowed, the cost saved can be shared between the enterprises and users. When the power grid cost is higher than the “cost allowed”, it will voluntarily burden the higher part, i.e., the power grid will suffer from loss. So, in theory, the power grid will focus on its own operation, improve efficiency, reduce cost and gain more incomes. However, essentially, this kind of mode lacks competition for the reason that it relies on administrative order to propel enterprise efficiency and still depends on government to comprehensively understand the enterprises’ condition and guide their development. Seeing from the past experience, this is almost impossible. Even though the government supervise the power grid’s cost comprehensively, this kind of supervision is bound to be inefficient for the internal cost of enterprises can be truly grasped only by its own operators. Moreover, the power grid of natural monopoly has considerable negotiation capability. People who have some knowledge over power reform will be able to remember that the State Grid boycott splitting with “power shortage” when power supply runs short. Therefore, under such kind of powerful negotiation capability, the power transmission and distribution price of power grid enterprises will certainly gradually approach the price gap between power sale price and purchase price. To gain income from price gap may reemerge in other mode.
Academically, only external pressure can urge enterprises to enhance internal competitiveness, such as reduce cost, reduce price and maintain competitiveness. So, fundamentally, China’s power reform still has to rely on market competition. However, technical reform is a strategy of substantial reform. Seeing from this sense, Shenzhen’s pilot is worth expecting.
Published on 21st Century Business Herald
