Step Electricity Price System Needs To Be Improved

        Compared with the international level, China's electricity price is in a lower position, while the industrial and commercial electricity prices have been giving more cross subsidies to residential electricity prices.

Recently, the national development and Reform Commission (NDRC) has made a rare comment on the current electricity price and step tariff system, emphasizing the gradual easing of cross subsidy of electricity price and restoring the property of power commodity, which has caused heated discussion. On June 28, power companies also ushered in a large area of gains.

      Some industry insiders predict that the electricity price mechanism has come to the right time to adjust. However, the national development and Reform Commission has not made a more direct and clear statement on the follow-up operation. Therefore, there are different opinions on how to adjust the follow-up electricity price mechanism.

With the increase of the proportion of new energy, peak load regulation and cost absorption of power grid have become the focus of many policy documents. Picture vision China

Restore the property of power commodity?

On June 24, in a reply column posted by the Chinese government on the Internet, a netizen in Shaanxi said that in view of the serious excess of installed capacity and oversupply of electric power, and the power supply is saturated and no longer in short supply, it is suggested to improve the original residential step tariff policy, encourage urban and rural residents to use more clean electric energy and use less coal for heating or cooking.

In response, the national development and Reform Commission replied that for a long time, China has tried to lower the residential electricity price, and the residential electricity price is significantly lower than the power supply cost, which is due to the corresponding cross subsidies undertaken by industrial and commercial users. Compared with other countries in the world, China's residential electricity price is on the low side, and the industrial and commercial electricity price is on the high side.

The national development and Reform Commission said that, in accordance with the requirements of further deepening the market-oriented reform of electricity prices, the next step is to improve the residential step tariff system, gradually ease the cross subsidy of electricity prices, so as to better reflect the cost of power supply, restore the commodity attribute of electricity, and form a residential electricity price mechanism that more fully reflects the cost of electricity consumption, the relationship between supply and demand and the degree of resource scarcity.

As a think tank of State Grid Corporation of China (SGCC), a group of data released by State Grid Energy Research Institute in March this year showed that China's electricity price is at a low level both compared with 35 OECD member countries, emerging economies and the United States.

According to the data provided by the State Grid Energy Research Institute, in 2019, China's residential electricity price is in the penultimate place compared with the 35 OECD countries, and the industrial user's electricity price ranks the bottom ninth.

According to the previous introduction of State Grid, China's sales price consists of on grid price, transmission and distribution price, line loss discount, government funds and surcharges. According to the classification of electricity consumption, there are four types of sales electricity prices: large industry, general industry and commerce, others, residential electricity price and agriculture.

The sale price is the final electricity price of power users. The on grid price compensates the power production cost of power generation enterprises, and the transmission and distribution price compensates the power transmission cost of power grid enterprises, including the loss in the process of power transmission. Government funds and surcharges approved by the State Council are non tax revenue collected through electricity prices, which are used to subsidize renewable energy power generation, major water conservancy project construction and resettlement of hydropower station reservoir area.

From January to May this year, domestic power consumption grew rapidly year on year, and the growth rate of power consumption in three industries exceeded double digits; All kinds of power generation also increased year-on-year, and coal prices climbed to a high level, squeezing the profits of power plants.

According to the data of China power grid, from January to May this year, the electricity consumption of the whole country was 3.23 trillion kwh, an increase of 17.7% year-on-year; Among them, the electricity consumption of urban and rural residents was 468.1 billion kwh, a year-on-year increase of 4.1%. The growth rate was slightly lower than that of the same period last year, accounting for 14.5% of the total electricity consumption.

In the first five months of this year, the power generation capacity of power plants above Designated Size nationwide reached 3.18 trillion kilowatts, a year-on-year increase of 14.9%, and a year-on-year increase of 18 percentage points.

Different opinions on the adjustment of electricity price mechanism

As one of the most important basic energy prices, the degree of marketization of China's electricity price mechanism is constantly improving in the process of its formation, development and improvement.

Before 2004, each power plant was priced separately by government departments; In April 2004, the online electricity price policy was officially issued, and in December of the same year, the coal and electricity price linkage mechanism was introduced.

In January 2016, the improved coal electricity price linkage mechanism was officially implemented; In January 2020, the national Standing Committee of the people's Republic of China will cancel the linkage mechanism of coal and electricity prices, and the benchmarking on grid pricing mechanism will be changed into a market-oriented mechanism of "benchmark price + up and down floating". The benchmark price will be determined according to the current local benchmark on grid price of coal-fired power generation.

Zeng Ming, Professor of School of economics and management of North China Electric Power University and director of energy Internet Research Center, pointed out that electric power product is essentially a kind of commodity, and its price should be determined by value, and reflect the change of supply-demand relationship, so as to play the role of price signal in regulating market demand and guiding consumers' power consumption.

In order to avoid price monopoly, considering the compatibility of fairness and efficiency, electricity price is strictly controlled by the government; However, it is rare that the residential electricity price is inversely linked with the industrial and commercial electricity price.

Zeng Ming pointed out that in theory, the voltage level of residential users is low, the power load is dispersed, the transmission distance is long, and most of them use electricity at the peak of power demand. The power supply cost of all users is the highest, while the power supply cost of industrial and commercial users is relatively low. Therefore, the sales price of industrial and commercial users should be lower than that of residential users, but the actual situation is just the opposite.

Since the beginning of this year, the economic situation is getting better and the high temperature weather is coming, and the demand for electricity is constantly increasing. The peak of power load in many southern provinces is ahead of schedule. In some areas, there is even a shortage of electricity. This has also caused discussion on the adjustment of power price mechanism in the industry.

At the end of March this year, Shenwan Hongyuan Securities pointed out in a research report that, with the increase of the proportion of new energy, peak load regulation and cost absorption of power grid have become the focus of many policy documents, or provide strong support for electricity price.

Shenwan Hongyuan Securities pointed out that increasing the proportion of new energy is bound to increase the cost of peak load regulation, and reasonable price mechanism is the key to ensure the long-term healthy development of power system; Therefore, in the future, effective transmission of peak load regulation cost and elimination of backward production capacity through market-oriented means will become the focus of work in the energy field in the next stage.

On June 2, this year, the price department of the national development and Reform Commission held a forum on electricity price work enterprises, analyzed and judged the current situation and tasks of electricity price work in the future, studied and discussed the key tasks of deepening the electricity price reform and improving the electricity price policy in the next step.

Soochow Securities pointed out in its report on June 10 this year that from the perspective of supply-demand relationship, spot price and compensation mechanism, there is a realistic basis and theoretical possibility for electricity price to rise.

Soochow securities, on the other hand, believes that the introduction of the price formation mechanism policy for energy storage and pumped storage shows the direction of future electricity reform and electricity price, that is, the new installed capacity of wind and solar power will get rid of subsidies and move towards marketization, and energy storage and pumped storage will be an effective market mechanism supporting flexible resources. Under the dual carbon target, the transmission and distribution price policy will inevitably make adaptive adjustment, but the price adjustment policy for the whole industry will not appear.

Peng Peng, Secretary General of China new energy power investment and financing alliance, believes that at present, it is difficult to adjust the domestic electricity price, and there is not much room for the reduction of industrial and commercial electricity prices. The adjustment of residential electricity prices may also be limited to the adjustment of three levels of electricity prices.

According to the guidelines of step tariff specified by the national development and Reform Commission in 2011, residents' electricity demand is divided into three levels, with the first and second levels covering 80% and 95% of the average monthly electricity consumption of residents respectively.