Power prices expected to undergo major reforms

• Source: Global Times
• [07:55 November 20 2009]
• Comments

Not only the grid operators, but also some power generators also showed serious losses, according to an analyst from a securities company who declined to be named.

Analysts said the government-oriented power pricing system is the major cause of the problem.

In China, the government still sets both retail power prices as well as on-grid prices, although it has been planning to reform for several years.

In October, the Shanghai Securities News reported that China would allow the generators to compete in the prices they charge grids, and set price ceilings to protect users. But so far this plan still has not been enacted.

"A market-oriented pricing system is the major part of the reform plans," said Li Chaolin, an analyst at Anbound Group, an industrial research firm, "but it is very complex because each part of the power industry chain does not want to give up their profits."

The NDRC establishes the power price, while the local governments determine the price of coal, which is expected to increase. Consequently, many generators, most of which are State-owned companies, lost profits because of the high cost, an insider was quoted by the Shanghai Securities News as saying.

But things may get better since the government will likely soon unveil detailed plans about modifying the prices that power firms sell to grid operators in different areas.

The on-grid prices in some western provinces including Shanxi and Gansu provinces will be increased, while prices in some eastern provinces including Jiangsu and Fujian provinces will go down, the Shanghai Securities News reported on Thursday.

"This plan will pave the way for the country's power price reform though there will be many challenges before it is completed," Zhao Qianming, an analyst from Sinolink Securities,said on Thursday.