Beijing struggling to fulfil its vow to reform power pricing
Efforts to make prices dependent on demand and supply have largely failed, with the state body reluctant to relinquish control
Beijing's decade-long attempt to change its electricity pricing system, from one set by bureaucrats to one based on demand and supply, has made little headway.
The effort, first spearheaded by former Premier Zhu Rongji, has been hampered by insufficient political courage to open the market to price competition and let end-user electricity prices reflect the true cost of energy production and distribution, analysts said.
At the end of 2002, a circular on power pricing reform was approved by the State Council. It envisioned "gradually setting up a power pricing system that is commensurate with a socialist market economy", with a long-term objective to have on-grid tariffs charged by generators and end-user tariffs determined by market forces. Transmission and distribution tariffs would continue to be set by the state.
For the short-term, it wanted on-grid tariffs to reflect a "suitable level of competition" among generators, and realise a close linkage of on-grid and end-user tariffs. No time-frame was given.
As long as there is no time-table, all the talk about pricing reform is not meaningful
The purpose of reform is to increase efficiency in the entire power generation and distribution supply chain, so as to facilitate economic growth and environment protection, the circular noted. However, it added a caveat that prices must "remain largely stable" in the initial stages.