April 15, 2015 / 8:26 AM / 5 years ago

China extends pilot power sector reform to more regions

BEIJING, April 15 (Reuters) - China is expanding a pilot scheme that gives local authorities more control over electricity transmission and distribution prices, as the world’s largest power market steps up deregulation to boost efficiency, according to a government document.

The sector revamp would require the country’s two dominant grid operators, the State Grid Corp of China and China Southern Power Grid, to eventually segregate their power transmission and distribution businesses, a transformation that may take years to complete, experts say.

Following Shenzhen and Inner Mongolia, the provinces of Anhui, Hubei, Ningxia and Yunnan will join the pilot scheme to liberalize retail power tariffs, the state economic planner, the National Development and Reform Commission, said on its website on Wednesday (www.ndrc.gov.cn).

Under the pilot plan, local authorities will set transmission and distribution costs based on “cost plus a reasonable margin”.

Meanwhile, China has said that it would also launch spot electricity trading platforms over which qualified generating companies and bulk end-users can settle tariffs themselves, starting with newly installed power stations.

Such deregulation will target commercial and industrial power consumers, rather than residential users and public utilities over which Beijing will maintain a price-setting role.

The industry’s previous overhaul dates back to 2002, when Beijing separated power generation from transmission, creating five top state-controlled generating firms and two grid firms. Reform has since slowed and China has frequently experienced power shortages as economic growth outpaced supply.

The government now sees a window to push for deregulation as the economy slows.

Reporting by Chen Aizhu

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