China’s biggest gas distributor warns against including connection fee in return cap

Beijing shouldn’t include customer connection fees in the calculation of a proposed cap on natural gas distribution returns or it will risk damaging industry development incentives, according to one of China’s largest gas distributors.

Sean Wang Shaojian, chief executive of Hebei province-based ENN Energy, which accounted for 7 per cent of natural gas consumed in China last year, said the industry opposes such an idea as it works against policy-makers’ objective to boost natural gas usage to combat pollution.

“Connection fees should not be included in the proposed cap’s calculation because China still needs to encourage the usage of gas to replace more pollution-prone energy,” he said after the company’s annual shareholders’ meeting on Friday. “All distributors in the industry will not agree to this.”

The National Development and Reform Commission said in its five-year plan for the industry in January that it is aiming for natural gas to account for 8 to 10 per cent of the nation’s total primary energy consumption by 2020, up from 5.9 per cent in 2015.

A Citi research report issued on May 15 said the NDRC has issued a consultation paper proposing to set a ceiling of 6 per cent return on distributors’ assets.