CEC Says China's Electricity Tariff Level Should Increase by 5% Per Year

The electricity price in 2015 should be 728.7 yuan/kilowatt-hour

The China Electricity Council (hereinafter referred to as "CEC") released the "12th Five-Year Plan" rolling research report for the power industry on its official website yesterday (hereinafter referred to as the "Report"), saying that China's electricity price level is low and it is reasonable in 2015. The average selling price should be 728.7 yuan/kilowatt-hour, which is 27.6% higher than 2010 and 5% per year. The responsible person of the CEC pointed out to the “First Financial and Financial Daily” that the electricity price currently accounts for a declining trend in the proportion of Chinese residents’ income. It should implement two-part tariffs in the power generation sector and strengthen the role of the government in the pricing of electricity prices.

According to the "Report", during the "12th Five-Year Plan" period, the investment in the electricity industry in the country will reach 6.1 trillion yuan, an increase of 88.3% over the "Eleventh Five-Year Plan." Among them, the power investment was 3.2 trillion yuan, accounting for 52% of the total investment; the grid investment was 2.9 trillion yuan, accounting for 48%.

During the “Thirteenth Five-Year Plan” period, investment in the country’s electricity industry will reach 7.1 trillion yuan, an increase of 16.4% over the “Twelfth Five-Year Plan”. Among them, the power investment is 3.6 trillion yuan, accounting for 51% of the total investment; the grid investment is 3.5 trillion yuan, accounting for 49%.

The "Report" also pointed out that in consideration of rising coal prices, to make up for historical debt and 8% of the net assets of power companies under the conditions of a reasonable average sales price in 2015 should be 728.7 yuan / kilowatt-hour, an increase of 27.6 over 2010 %, average annual growth of 5%; sales price in 2020 should reach 831.7 yuan / kilowatt-hour, an increase of 14.1% over 2015, an average annual growth of 2.7%.

Ouyang Changyu, deputy secretary-general of the CEC, told the newspaper that the conclusion of the "Report" was based on the comparison of the prices of oil, natural gas, coal and electricity, and the average level of China and Western developed countries. The results of the study show that China's electricity prices are low.

Ouyang Changyu pointed out to the newspaper that China’s electricity consumption accounted for a significant downward trend in household income. He said that the above conclusions of the CEC were obtained by comparing the ratio of the electricity price in 1980 and 1990 to the income of urban and rural residents as compared with the present proportion, and comparing with the same proportion in the United States. Due to inflation and other factors, the current electricity price level is more than double the current electricity price level, but the income level has already turned several times.

Regarding the formation of electricity prices, some scholars have previously proposed that the government should withdraw from the pricing of electricity tariffs so that electricity prices can be completely formed by the market.

CEC Secretary-General Wang Zhixuan pointed out to the newspaper that the government could not withdraw from this important link in the pricing of electricity, but would instead strengthen it. "The government will give the market completely regardless of the electricity price. This is definitely not acceptable," he said.

He also stated that the timetable for the reform of the electricity tariff system is also in the hands of the government. The State Council had a framework road map for power system reform in 2003. However, due to various reasons such as the macroeconomic situation, the State Council lags behind. Therefore, at present, some major contradictions in the power industry are also closely related to the formation mechanism of electricity prices.

Ouyang Changyu also pointed out that from the perspective of rationalizing the formation mechanism of electricity prices, CEC also advocates the implementation of two-part tariffs in power generation.

The two-part tariff is a tariff system based on capacity and electricity respectively. The capacity price is based on the transformer capacity or the maximum demand of the industrial enterprise as the basis for calculating the electricity price. The electricity supply department and the electricity use department shall sign the contract, determine the quota, and collect the monthly quota, instead of the actual amount of electricity consumed; the electricity price It is calculated according to the actual power consumption of the electricity sector.

Ouyang Changyu believes that the implementation of two-part tariffs is the most beneficial for solving the current and long-term problems in China's power industry. The core of the two-part tariff is: the implementation of two-part tariffs for power generation, the transmission and distribution of independent grid tariffs for the power grid, and then the linkage between the sales price and the on-grid tariff.

The capacity electricity price in the two-part tariff should first ensure that the investment of the power investor is not substantially lossy. Due to the continuous rise in coal prices, the thermal power industry has suffered losses for the entire industry for several consecutive years, resulting in a large withdrawal of foreign capital in the thermal power industry.

However, Ouyang Changyu pointed out at the same time that the issue of how to determine the current capacity price also poses a challenge to the implementation of the two-part tariff. He said: "The capacity electricity price should not be approved by the government itself, but should be after all the power lines are planned and approved by the State Council and announced to the whole society. After that, the public bidding for the entire society will be conducted and the investors will be determined at the same time. Electricity price."