China Set More Transmission Rates in Direct Power Trade Plan

BEIJING, June 4 -- China has set power transmission tariffs in three more provinces in a pilot scheme that aims to encourage direct trade between power generators and users, though some industry officials doubt the plan will alter the country's rigid and opaque electricity market.

Of the new tariffs, the basic rates charged by grid operators will remain unchanged in their respective regions, and additional rates based on usage, excluding line losses, were set at 0.119 yuan per kilowatt hour (kwh) in Zhejiang, 0.129 yuan in Jiangsu and 0.113 yuan in Chongqing, the State Electricity Regulatory Commission (SERC) said in an announcement on its website (www.serc.gov.cn).

The additional charges are different for different voltage power lines. The lower the voltage, the higher the charges.

It was not immediately clear whether the power transmission and distribution charges set by the government would help lower power prices paid by end-users, which are also subject to the prices and volumes agreed between power generators and users.

Interested generators and consumers have to apply for permission from the National Development and Reform Commission (NDRC), National Energy Administration (NEA) and SERC before they start any direct negotiation on power prices and volumes.

China had set power transmission and distribution rates in Fujian and Gansu provinces in November last year but only gave approval to six power users and seven generators to join the programme last month. The government did not disclose whether any direct deals have been reached.

China's power generators have to sell all their output to grid operators and the latter then sell to power users, all at fixed rates set by the NDRC.

Beijing introduced the direct trade plan in earlier 2009 by firstly allowing 15 aluminium smelters to negotiate power prices with generators, aiming to finally open 20 percent of the power market for direct trade between power generators and consumers.

It was difficult to reach any deals if the "route fee" charged by grid operators were not fixed because users and generators had to face more uncertainty in negotiations.

But only a few smelters were reported to have clinched cheaper power price deals since neither grid firms nor power generators would like to give up the gains that they have enjoyed under the existing pricing system.

The system is essentially a zero-sum game, so it is diffucult to see real progress, Lu Qizhou, general manager of China Power Investment Corp, one of China's five state-owned major power generating groups, said in January.

Some local governments, however, forced local power firms and grid operators to supply their pet industries at cheaper rates to boost economic growth and fiscal coffers amid the global economic downturn.

Beijing has ordered a thorough check of power prices nationwide from June to stop unauthorised power price discounts and to make sure other pricing rules are followed.