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China plans electricity price reform
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Economic Information Daily reports that China plans to carry out a further round of electricity price reform.

Rumors of electricity price reform have caused some consumers to try to stock up in advance. A Beijing woman, Miss Wang, told Economic Information Daily that a friend who worked at electricity department had told her the electricity price was about to go up so she rushed to the Bank of Beijing to buy as much as she could afford on the spot.

Sha Yiqiang, editor-in-chief of China Power Enterprise Management magazine and a member of the China Electricity Council (CEC) said that the National Development and Reform Commission is currently drafting a plan for electricity price reform.

The time is ripe for electricity price reform

The Chinese government issued a plan to reform electricity prices as far back as July 2003. But since then there has been little progress principally because the continuous rise in both the consumer price index (CPI) and producer price index (PPI) made the government cautious about adjusting electricity prices

"But now the time is ripe for reform," Sha Yiqiang said. "Since the end of last year, the steep decline in CPI and PPI has offered a rare opportunity for China to push ahead with price reforms for energy and natural resources. And as China's industrial growth slows down due to the crisis, the contradiction between energy supply and demand has eased, making it easier to initiate price reform."

Experts said it was not necessary to follow Miss Wang's example and rush out to buy electricity. According to Professor Hu Zhaoguang, vice director of State Power Economic Research Institute, the price of industrial electricity and commercial electricity will be raised first. And according to Chinese law, public hearings must be held before domestic electricity prices are adjusted.

Pricing mechanism: Key for electricity reform

Hu Zhaoguang emphasized that the aim of price reform was not to raise the price of electricity but to establish a scientific pricing mechanism.

"Since 1985, China has taken a series of measures to put forward electricity price reform with some success. But the electricity price system still has lots of problems, such as price variation, serious cross-subsidies on price and so on, which means the system cannot play its role of balancing supply and demand," President of the Technical Economics Research Institute of Huaneng Group Xie Jin said.

Most experts agree that reform of the pricing mechanism for electricity should be top of the agenda. It is essential to establish a market-based price formation mechanism for electricity as soon as possible as such a mechanism can better reflect market supply and demand.

(China.org.cn by Ma Yujia, April 9, 2009)

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