Beijing eyes two-tier system for power sector

A two-tier regulatory system for the mainland power industry, designed to separate the state's oversight and business roles, is expected to form part of sweeping reforms to be unveiled this year.

A proposed State Electricity Regulatory Commission (SERC) will oversee day-to-day industry policies. The State Development and Planning Commission (SDPC) will continue to set key policies and decide on electricity tariffs and construction of new power plants, according to an industry source.

The source said the two regulators might have overlapping roles but they would be complementary.

'Electricity price regulation is a core element of power-sector reform and there is a division of roles in the future regulation of electricity prices,' the source said.

'The [SDPC] will be responsible for macro-policy formulation, while the [SERC] will ensure fair competition and stamp out monopolistic behaviour.'

He cited Beijing's plan to set up a two-tier tariff system as part of nationwide implementation of power pooling - the delivery of electricity through competitive bidding in each province.

'The general concept of having a capacity payment portion and an energy payment in the proposed system came from the SDPC, but formulation of the implementation details will be the job of SERC,' the source said.

Analysts said the appointment of former Zhejiang governor Chai Songyue, an outsider in the power sector, as head of SERC, would help ensure objectivity.

SERC aims to ensure a clear-cut separation of government and business operations of industry behemoth State Power Corp (SPC), which is expected to be broken up into five generation companies and two transmission units this year.

SPC has a co-ordinating role in industry regulation. All new power projects and applications for tariff changes are discussed and filed through it before they are submitted to the SDPC for approval.

SPC's assets are to be re-allocated into the seven group companies which will be pure industry operators.

Eleven of SPC's listed power-generating vehicles - domestic A shares and Hong Kong-listed H shares - will be re-allocated into the five generation companies.