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On November 30, National Development and Reform Commission (NDRC) released Notice on the Issuance of Supporting Documents to Electricity System Reform, which contains a total of 6 core documents supportive to the new electricity reform as the following:
Opinions on Implementation of Promoting the Reform on Power Transmission and Distribution Price
Opinions on Implementation of Promoting the Power Market Construction
Opinions on Implementation of the Establishment and Standard Operation of Power Trading Institutions
Opinions on Implementation of Orderly Opening Up Electricity Development and Usage Plan
Opinions on Implementation of Promoting the Power Sale-Relating Reform
Opinions on Guidelines for Strengthening and Standardizing Supervision and Management of Coal-fired Captive Power Plant
For the above 6 core supporting documents issued, what are concerned the most by the industry include the specific measures for the reform on electricity transmission and distribution, the disposal of the power price cross-subsidy, electricity market construction, regional and provincial electricity market, specific duties for the market management commission, major power sellers after liberalization of the power sale-related markets, participation of grid-connected self-supply power plants into the market trading and the latest progress achieved in the power system pilot reform.
Based on those various issues the industry is the most interested in, the officials from NDRC and National Energy Administration make detailed interpretations on a total of 18 important issues. The following is the Q & A record.
The Q & A Record
Question 1
What is the overall objective to promote the reform on electricity transmission and distribution? What is the significance of establishing an independent electricity transmission and distribution system?
The reform on power price constitutes an important part of the power system reform. The Several Opinions of the CPC Central Committee and State Council on Further Deepening the Power System Reform (ZhongFa [2015] Document No. 9; hereinafter referred to as the 9th Document) has made the a deployment for the reform tasks including separate examination and determination of electricity transmission and distribution price, and orderly liberalization of competitive power prices except for power transmission and distribution. In the Opinions on Implementation of Promoting the Reform on Power Transmission and Distribution Price, it further clarifies that, according to the principle of "allowing costs plus a reasonable return", the grid enterprises are permitted to appraise and decide power transmission and distribution price in accordance with total revenue and sub-voltage level, to establish a vigorously regulatory, scientific and transparent independent electricity transmission and distribution system with clear rules and reasonable levels.
Appraising and deciding power transmission and distribution price independently represents the basis to realize trading on the market, a premise of competitive business opening-up, which is important for restoring the features of electricity products, and fully achieving the power reform goals. Specifically, it is mainly reflected on the following four aspects:
Firstly, cut enterprise and society’s power usage costs. After the reform, the power transmission and distribution price will be relatively fixed, and fluctuations in power generation price will directly transfer to the power sale price. Currently, the power supply and demand is in a more loose condition with lower coal price, the electricity users with option right to choose may reduce the power consumption costs through directly trading with the power generation enterprises, bringing reform bonus to the electricity users accordingly.
Secondly, play the role of price in regulating power supply and demand. Transmitting price signal smoothly will create a virtuous cycle where production is driven by consumption, and consumption is promoted by production. For electricity production, "producing according to sales" will curb a blind expansion of power generation enterprises, while for electricity consumption; the market-oriented pricing mechanism will effectively restrain irrational power demand.
Thirdly, standardize the operating mode of grid enterprises. After the reform, these enterprises will charge wheeling cost according to the power transmission and distribution price approved by the government, who can no longer use the gap between on-grid power price and power sale price as a main source of revenue, to ensure fairness and openness to all users and improvement in the services.
Fourthly, strengthen cost constraints on the grid enterprises. Strictly examining and verifying grid-enterprises’ permitted costs may enable them to enhance management, examine and cut unreasonable expenditure, curb inappropriate investment, reduce costs and improve efficiency.
Question 2
In terms of the reform on power transmission and distribution price, what specific measures are proposed by the Opinions on Implementation of Promoting the Reform on Power Transmission and Distribution Price?
To accelerate the reform on power transmission and distribution price, the Opinions on Implementation of Promoting the Reform on Power Transmission and Distribution Price puts forward 4-aspect specific measures as the following:
First is to gradually expand the pilot coverage of the reform on power transmission and distribution price.
Second is to conduct carefully the measurement of power transmission and distribution price.
For the pilot areas, NDRC conducts unified regulation and examination of organization costs, which shall strictly review and reduce irrelevant, unreasonable investments and costs in accordance with the Measures on Regulation and Examination of Power Transmission and Distribution Pricing Costs; for the non-pilot areas, on the basis of carrying out cost investigation, NDRC measures the grid’s permitted total revenue, and power transmission and distribution price by voltage level based on effective assets.
Third is to promote cross subsidy reform
Combining the power price reform process and the supporting reform on cross subsidies among different types of electricity, it will gradually reduce the industry and commerce’s internal cross subsidies, and properly dispose the cross subsidies to the residents and agricultural users.
Fourth is to clarify the power transmission and distribution price policy on electricity’s direct trading during a transition period.
In the area where power transmission and distribution price has been set, the electricity’s directly trading will be implemented in accordance with the examined and verified power transmission and distribution price; in the area where the power transmission and distribution price has not yet been examined and verified, it may adopt the way maintaining unchanged gap between grid purchase and sale price, that is, the adjustment in on-grid power price of power generation enterprises shall be the same as the one in sale power price, to keep the difference unchanged.
Question 3
During the process of the reform on power transmission and distribution price, how will the electricity cross subsidies be deal with?
Under the current system, China’s sales price of power include major national water conservation project construction fund, agriculture net loan repayment fund, renewable energy development fund, large & medium-sized reservoir resettlement supportive fund, urban utilities surcharges and other government funds as well as the cross subsidies granted for government considerations in line with industrial policies. Objectively, for the power price, there exist industrial & commercial subsidies for residents, urban subsidies for rural area, high-voltage level subsidies for low voltage level, and other cross-subsidies granted for government considerations. Moderate cross-subsidization helps implement national macroeconomic policies and guarantee general electricity services; however, if the cross-subsidization is huge, it will be bad for guiding the users’ rational consumption and fair burden.
ZhongFa No. 9 Document proposes to properly dispose cross subsidies of power price by combining the power price reform process, which is supported by the reform on cross-subsidies between different types of electricity, to ensure that residents, agriculture, important public utilities and public services have relatively stable electricity usage prices. The Opinions on Implementation of Promoting the Reform on Power Transmission and Distribution Price further clarifies the operational requirements as:
- During the transitional period, the grid enterprises report the current cross subsidization amount among all kinds of users’ power prices, and recycle through the power transmission and distribution price examined and approved by the governmental price authorities.
- After the reform on power transmission and distribution price, according to the grids’ assets, costs, quantity of electricity, and line loss rate at different voltage levels, it examines and verifies the power transmission and distribution price by voltage level, measures and lists separately the cross subsidies enjoyed by residents and agriculture as well as the cross-subsidy borne by industrial and commercial users.
Question 4
What make up of a power market? What is the path to implement power market construction?
A power market is mainly composed of medium & long-term market and spot market, where the medium & long-term market mainly conducts multiple-year, yearly, quarterly, monthly and weekly trading of electric energy quantity, and auxiliary services including interruptible load and voltage regulation. The spot market mainly conducts day-ahead, intraday and real-time electric energy quantity trading; auxiliary service transactions involving ancillary service and frequency regulation. When conditions become mature, it will undertake exploration in market capacity, electricity future and other derivative transactions. The Opinions on Implementation of Promoting the Power Market Construction makes it clear that the power market construction shall be implemented through the followings: orderly opening up the electricity development and usage plan, and competitive power price; continuously expanding the scope of market entities participating in direct trading and the size of electric quantity, and gradually establishing market-oriented cross-province, cross-region power trading mechanisms. It shall select qualified areas for pilot reform, establishing more complete power markets including medium & long-term and spot markets; summarize the experiences, improve the mechanisms, and enrich varieties, as well as expand the pilot scope if permitted; gradually establish a power market system consistent with the national conditions.
- In non-pilot areas, market-oriented trading shall be carried out in accordance with the Opinions on Implementation of Orderly Opening Up the Electricity Development and Usage Plan.
- Pilot areas may develop the path separately for orderly opening up the electricity development and usage plan according to local conditions.
- Retail markets shall carry out market-oriented trading in accordance with the Opinions on Implementation of Promoting Electricity Sale-related Reform
Question 5
As we all know, the construction and operation of a power market is very complex that requires perfect supporting mechanisms. So may I ask that which important tasks are deployed in the Opinions on Implementation of Promoting the Power Market Construction?
The Opinions on Implementation of Promoting the Power Market Construction requires pushing the construction forward from nine aspects:
The first is to establish relatively independent power trading institutions.
The second is to build a technical supporting system for power market trading.
The third is to establish a system aiming at giving power purchase and power generation priority. It shall give power purchase and power generation priority to the power generation and usage for safeguarding public welfare, and to regulatory power generation and use. It shall adhere to giving clean energies priority being on grid, and gradually form a market-oriented electric energy quantity balance mechanism in the precondition of guaranteeing a balanced demand and supply.
The fourth is to establish a relatively stable medium & long-term trading mechanism. Offering power purchase and power generation priority shall be regarded as a signed contract on annual electric energy quantity trading. Interruptible load, voltage regulation and other ancillary services may also enter into long-term trading contracts.
The fifth is to improve cross-province, cross-region electricity trading mechanisms. It shall mainly focus on medium & long-term trading, which is supplemented by temporary trading, and encourage power generation enterprises, power users, and major power sellers to realize cross-province, cross-region power purchase and sale through competition.
The sixth is to establish an effectively competitive spot trading mechanism.
The seventh is to set up an ancillary services trading mechanism.
The eighth is to form a new mechanism for renewable energies to participate in market competition. The renewable energies in planning have the priority in generating power, and transferring power generation contracts. It shall encourage renewable energies to participate in power markets, and encourage cross-province, cross-region consumption of renewable energies.
The ninth is to establish a market risk prevention mechanism.
Question 6
What responsibilities are borne by regional and provincial power markets individually?
The power market system is divided into regional and provincial (autonomous region and municipality) power markets, regardless of different levels between the markets. The regional power markets include two categories: optimization of resources allocation within a larger range across the country and that within a certain range.
The optimization of resources allocation within a larger scope across the country is primarily realized through Beijing Electric Power Trading Center (established relying on the State Grid Corporation of China), and Guangzhou Electric Power Trading Center (established relying on the China Southern Power Grid Company), responsible for the implementation of national plans and local government agreements to promote market-oriented cross-province, cross-region trading.
The optimization of resources allocation within a certain range is primarily realized through medium & long-term trading and spot trading in the corresponding regional power markets.
Provincial (autonomous regions and municipalities) power markets mainly conduct the medium and long term trading as well as spot trading within provinces (autonomous regions and municipalities). It shall not repeat the establishment of electricity spot market in the same geographical area.
Question 7
Future electricity market, which companies or users can become the main market? What are the access conditions?
The Opinions on Implementation of Promoting the Power Market Construction clearly points out that the main power market entities include all - types power generation enterprises, power supply enterprises (including local power grids, power wholesale counties, high-tech industrial parks and economic & technological development zones, etc.), power sellers and power users. Various market entities should meet the national requirements on energy saving and environmental protection, and satisfy industrial policy requirements, and register at trading institutions. When participating in cross-province, cross-region trading, they may be involved in the transactions on trading platforms anywhere they locate, or may entrust a third-party agent to participate in the trading.
In terms of entry conditions, the basic requirements for power generation enterprises and users are as the following:
- For the power generation enterprises participating in market transactions, their projects should comply with the national regulations; also, the unit energy consumption, environmental protection and emissions, and grid-connected safety should meet the national and industry standards. New power generator sets approved may participate in the power market trading in principle.
- For the users participating in market trading, they should be the ones whose power connected electric voltage shall be above a certain level, with greater capacity and electricity consumption. Newly added industrial users may enter the market for trading in principle.
- For the users meeting the entry conditions, all of their electric energy quantity should be involved in the market trading after selecting to enter it, no longer purchasing electricity according to government pricing. For those users satisfying the entry conditions but not choosing to participate in direct trading or purchasing power from power sellers, they shall be provided with the minimum-guarantee services by local power supply enterprises, and purchase power according to government pricing. When choosing to enter the market, they are not allowed to exit within a certain period.
Question 8
The No.9 Document on the power reform proposes to "establish relatively independent power trading institutions". So which aspects reflect trading institutions "independence" and "relativity"?
In accordance with the requirements in the No.9 Document, the Opinions on Implementation of the Establishment and Standard Operation of Power Trading Institutions make clear regulations for relatively independent trading institutions from function positioning, organizational form, system framework, personnel, sources of income and other aspects.
The trading institutions’ independence mainly reflects in:
The first is functions of the trading. Trading institutions are responsible for market trading organization; the second is organizational form, which may take corporation and membership when establish trading institutions in accordance with the regulations and the rules approved by the government; the third is operation management. Trading institutions have personnel, assets and material adaptive to its performing trading responsibilities that may charge main market entities reasonable costs. Their daily management and operation may not be subject to the intervention from the main market entities, but need to accept the government’s regulation; the fourth is personnel appointment. Senior management shall be recommended by the market management committee, with the appointment in accordance with the organizational procedures.
The trading institutions’ relativity mainly reflect in:
The first is that they are established by relying on the existing basic conditions for the grid enterprises, and the employees working for the trading agencies may take the gird enterprises’ current employees as the basis; the second is that they may adopt corporation with share relatively held by the grid enterprises, subsidiary of grid enterprises, membership and other organizational form; the third is that they remain the way of electricity billing settlement services provided by the grid enterprises unchanged during the initial period after establishment, based on the settlement vouchers submitted by trading institutions; the fourth is that they do not clarify the attribution of day-head trading functions in trading business, but rather gradually clarify and regulate the functional boundaries between trading institutions and scheduling agencies, according to the practical operation experiences and situation.
Question 9
Why does it need to build Market Management Committee? What are the functions of the Market Management Committee?
To maintain an open, equitable & just market, protect the legal rights and interests of main market entities, and fully reflect the will of all parties, the Opinions on Implementation of the Establishment and Standard Operation of Power Trading Institutions proposes to establish Market Management Committee.
The Market Management Committee is responsible for studying and discussing trading institutions’ regulations, transactions and operating rules; coordinating the matters relating to power markets; implementing voting based on different main market entity categories, and other reasonable procedures.
The Committee is composed of representatives selected by grid enterprises, power generation enterprise, companies, power sellers and power users by category. National Energy Administration and its agencies as well as relevant governmental departments may send representatives to attend the relevant meetings held by Market Management Committee.
Question 10
How could enterprises and users enter the market to become main trading bodies?
The Opinions on Implementation of the Establishment and Standard Operation of Power Trading Institutions states clearly that, market members shall take a registration management.
Provincial governments or departments authorized by the provincial governments shall release the power generation enterprises and main power sellers that have met the local standards annually, and perform dynamic regulations on user directory.
The power generation enterprises, main power sellers and users in the directory may go to trading institutions voluntarily and register as a main trading entity in the market.
In accordance with the power market entry regulations, the trading institutions accept market entry application submitted by market participants, sign market entry agreement and trading platform use agreement with the market members, process the trading platform user account and digital certificates, and manage the market member’s registration information and archives.
The market registered members may participate in various power trading, sign electronic contracts, and access to transaction information through online trading platforms.
Question 11
What is the general idea on promoting the reform of power generation and usage plan?
The Some Opinions of the Central Committee of the Communist Party of China and State Council on Further Deepening the Power System Reform puts forward to promote the reform on power generation and use plan, orderly open up the power generation and use plan other than those for public welfare and regulation. The Opinions on Implementation of Orderly Opening Up Electricity Development and Usage Plan further clarifies the general idea on the reform of power generation and use plan:
Guarantee the power use by the users without bargaining power through establishing a priority power purchase system.
Guarantee an on-grid priority given to the power generation by clean energies and regulatory power sources through establishing a priority power generation system.
Gradually open up other power generation and use plans through direct trading, power market and other market-based transactions.
Realize a smooth transition of electric energy quantity balance from mainly using plan-based methods to market-based methods in the precondition of ensuring a balanced power supply and demand, and safeguarding social order, to promote energy conservation and emission reduction.
Question 12
Electricity services for public welfare represent a basis to achieve general power services, where users have low, or even have no bargaining power. What measures will be taken to guarantee power purchase priority while opening up the power generation and use program?
To protect the power use by the users without bargaining power, the Opinions on Implementation of Orderly Opening Up Electricity Development and Usage Plan clarifies an establishment of power purchase priority system, proposing the four measures of safeguard as the following:
Firstly, it shall be mutually shared by generator sets. The electric energy quantity corresponding to the power purchase priority shall be shared mutually by all the public generator sets, with government pricing implemented for the corresponding power sales price, and on-grid power price.
Secondly, it shall strengthen the management relating to power demand. In terms of the load control system, a national management platform relating to power demand shall be established and perfected based on the load control system and power use information collection system. On the basis of early pilot experience, mobile peak-modulation capability relating to power demand shall gradually form that will account for 3% of the largest power load to guarantee a power supply and demand balance in the case of a slight electricity shortage.
Thirdly, it shall implement an orderly power usage by developing orderly power usage program. In the case of power shortage or major emergencies, the users with power purchase priority shall be guaranteed in electricity supply. Other users shall share power brownout obligation in accordance with the program of orderly power usage and the corresponding proportions.
Fourthly, it shall strengthen the electricity supply to undeveloped and remote area. The relating investment shall be added largely to ensure a full coverage of power use by people without electricity.
Question 13
What measures will be taken to protect the power generation priority while opening up the power generation and use program?
To ensure on-grid priority given to the power generation using clean energies and regulatory power, the Opinions on Implementation of Orderly Opening Up Electricity Development and Usage Plan clarifies the requirement of establishing a priority power generation system, and proposes four guarantee measures as the following:
Firstly, it needs to leave enough space to plan. The Opinions on Implementation makes clear that all areas shall reserve sufficient space for power generation when arranging an annual power generation plan. Among them, wind and solar power generation, biomass power generation, and power generation with waste heat, waste pressure and waste gas shall be arranged in full-amount in accordance with the resources conditions. Hydropower shall give considerations to resources condition, historical average and comprehensive utilization requirement to determine the power quantity generated. Nuclear power shall take into account the need of peak modulation peaking to be arranged for power generation in the precondition of ensuring safety.
Secondly, it needs to strengthen power transmission to outside and consumption. The Opinions on Implementation puts forward that cross-province, cross-region power transmission and reception should clarify the proportion of electric energy quantity generated by renewable energies in principle.
Thirdly, it needs to unify the forecasting on power output. The Opinions on Implementation make clear that, scheduling agencies are responsible for a unified forecast on wind and solar power output within their scheduling scope, fully use scheduling results of hydropower forecast, and balance electric energy quantity. In the precondition of ensuring safe operation of power, clean energies are given on-grid priority. In case facing abandoned water, abandoned wind and abandoned sunlight, it needs to notify the situation in time, and disclose the information related to scheduling and generator set operation in a timely manner.
Fourthly, it needs to organize and implement alternative, and realize tradability of power generation priority. The Opinions on Implementation requires amending the technical specifications of thermal power operation, and increase peak-modulation flexibility, to make leave peak-modulation space to renewable energy consumption. It also needs to encourage alternative power generation, and trading in peak-modulation ancillary services.
Question 14
Which market entities may sell electricity after the opening up of power sale-relating market?
The Opinions on Implementation of Promoting the Power Sale-Relating Reform points out that power sale business shall be open to the social capital, and main bodies in the power sale-relating market competition needs to be fostered through multiple channels, which help to allow more users to have option right, and to enhance the quality of power sale services and the level of electricity utilization by users.
The Opinions on Implementation makes it clear that the grid enterprises provide general power services, guarantee a basic power supply, and offer the minimum-guarantee power supply service to the users within their operating areas; power generation enterprises and other social capital may invest and establish electricity sales company; users with distributed power sources, public service sectors (water, gas, heating and other utility supply), companies offering energy saving service may engage in the market-oriented power sale business.
After the power sale-relating reform, the main bodies participating in the power sale competition may be divided into three categories: the first is the power sale companies of grid enterprises; the second is incremental electric distribution network invested by social capital, and the power sale companies with the right to operate electric distribution network; the third is independent power sale companies that do not have the right to operate electric distribution network and offer the minimum-guarantee electricity supply services.
The Opinions on Implementation also makes it clear that, there may have multiple power sale companies in the same operating area, but only one company is allowed to have the right to operate electric distribution network, and provide the minimum-guarantee electricity supply services. A power sale company may sell electricity in multiple operating areas.
Question 15
What requirements are proposed in the Opinions on Implementation of Promoting the Power Sale-Relating Reform regarding the market entry and exit for the main electricity sale bodies?
In accordance with the principle of streamlining administration and decentralization, the Opinions on Implementation of Promoting the Power Sale-Relating Reform makes innovative arrangements for the power sale-relating market entry and exit mechanism, a highlight in the new round of electricity system reform.
In terms of the market entry mechanism, an administrative license will be replaced by registration identification as the way to enter the market to cut administrative costs, conduct effective supervision, and improve work efficiency, with the focus placing on "one commitment, one public notification, one registration and two filings".
"One commitment" refers to that, market main entities in line with the market entry conditions should submit an application to provincial government or department authorizes by the provincial government, provide relevant information as required, and make a credit promise.
"One public notification" refers to that, provincial government or department authorized by the provincial government publicizes the information regarding whether market main entities have met the market entry conditions, relevant material and credit promise to the society, through "Creditchina.Gov.Cn" and other government-designated websites, which will be included into the market main entity directory published annually if there is no objection during the period of public notification, and managed dynamically.
"One Registration" refers to that, the market main entities included in the directory may register at trading institutions that organize transactions, and participate in the trading after approved.
"Two filings” refers to keeping record at energy regulators and credit information management agencies.
In terms of the market exit mechanism, the Opinions of Implementation clarifies that, market entities that violate state laws and regulations, seriously violate trading rules, and suffer bankruptcy shall be forced to exit from the market, and blacklisted, which are forbidden to re-enter the market. Also, they shall be deleted from the directory by the provincial government or the department authorized by the provincial government, and cancelled the registration by the trading institutions. Prior to the exit, market entities should have fulfilled or transferred all the signed power purchase and sale contracts, and dealt with related matters.
Question 16
From what considerations do you regard the Opinions on Guidelines for Strengthening and Standardizing Supervision and Management of Coal-fired Captive Power Plant as a supporting document?
Although the captive power plants have played a positive role in reducing production costs, promoting transmission of resource advantages in resources-rich regions, they still have many problems in plant construction and operation. For example, the phenomenon of construction before examination and approval, and mismatch between approval and construction is more serious; energy consumption indicators and emission level are generally high, significantly behind the public generator sets; operational management level and operating reliability is low; the enthusiasm of participating in power peak-modulation is not high enough, and the social responsibility borne is insufficient.
With a scale expansion in the installed capacity of the captive power plants, and improvement of energy efficiency and environmental standards for thermal power industries, it needs to further strengthen and standardize the supervision and management on the captive power plants, and gradually promote equal management for the captive and stated-owned power plants, which will help strengthen the power overall planning, and promote the captive power plants’ orderly development; help promote clean energy consumption, enhance the level of safe operation of power system; help raise energy efficiency and reduce emissions of air pollutants; help safeguard fair competition to achieve optimal allocation of resources.
Therefore, the Opinions on Guidelines for Strengthening and Standardizing Supervision and Management of Coal-fired Captive Power Plant puts forward the clear requirements for the coal-fired captive power plants’ standardized development from several aspects including planning and construction, operation management, responsibilities and obligations, energy saving and emission reduction, market trading, supervision and management, to create market environment for the fair competition between captive and public power plants.
Question 17
Which conditions should be satisfied by grid-connected captive power plants to participate in market trading? What rules should be complied with?
The Opinions on Guidelines for Strengthening and Standardizing Supervision and Management of Coal-fired Captive Power Plant clarifies the relevant requirements for the coal-fired captive power plants to become qualified market entities and to participate in market trading.
In terms of the market entry conditions, the Opinions on Guidelines proposes five requirements as the following: firstly, they should be in line with national industrial policies, and meet energy efficiency and environmental protection requirements; secondly, they should undertake government funds established by the country by law as required, and the cross subsidies for policy consideration that is consistent with the industrial policy; thirdly, they should undertake fairly social responsibilities as power generation enterprises; fourthly, they should be included into the main trading body directory released by governments at all levels, and register at the trading institutions; fifthly, they should satisfy other relevant regulations for market trading participated by the captive power plants.
In terms of the trading rules, the Opinions on Guidelines clarifies that, after an enterprises owning captive power plant has become a qualified market entity of power generation, the electric energy quantity beyond its self-generation for self-utilization shall be promoted in an orderly way to participate in direct trading with main power sellers and power users according to trading rules, or participate in the transactions with trading institutions; an enterprise owing captive power plant but failing to meet its own electricity needs shall undertake the government funds established by the country by law as required, who may be regarded as an ordinary power user to purchase power in the market equally after receiving the cross-subsidization for policy consideration that is consistent with the industrial policy.
Question 18
With the already issued supporting documents, a new round of power system reform will enter a critical phase of full implementation. May I ask how is the progress achieved currently in the pilot power system reform?
After its release, the Some Opinions of the Central Committee of the Communist Party of China and State Council on Further Deepening the Power System Reform have drawn high attentions from local governments, power enterprises and social sectors on the electricity reform. With further clarified specific policies, many areas have proposed to carry out multi-type power system pilot reform after the supporting documents are formed.
Up to now, NDRC and National Energy Administration have approved
With regard to the comprehensive pilot reform of power system,
With regard to the pilot reform on power transmission and distribution price, NDRC has included
Currently, NDRC has approved the first permitted power transmission and distribution revenue and power price level during the regulatory period for Inner Mongolia Western Grid, which is China's first provincial-level grid’s independent power transmission and distribution price measured according to the principle of "permitting costs plus a reasonable return" that can be used for direct trading in the power market. Through cost supervision and examination, irrelevant and unreasonable costs may be subtracted, with the space of price cut mainly used to reduce the industrial electricity price of Western Inner Mongolia Grid by RMB2.65 cents per kilowatt-hour, and the price cut amounting to about RMB2.6 billion.
Next, in accordance with the principle of encouraging grass-root innovation and supporting multi-mode exploration, NDRC will actively support the areas with reform will and operable programs to carry out a pilot reform; guide all areas to detail the pilot reform contents, improve supporting measures and highlight work focus; fully mobilize the initiative of all parties to participation in the power system reform, ensure an orderly carried out pilot reform, and guarantee prompt yet stable promotion of the power system reform.
