China to Expand Direct Power Supply Trial

飞雪寒冰

China may expand a direct power supply pilot program in a bid to break the country's current electricity transmission duopoly, a person close to regulators said.

The person told Caijing that the proposal for the extension of the reforms has received support from key departments in Beijing.

The proposal to expand the trial was drafted by the National Development and Reform Commission, the State Electricity Regulatory Commission and National Energy Bureau, and details will be released in early July, the person said.

The government in June set up a direct-sale trial which included 15 steel plants mostly located in central and western China.

飞雪寒冰

A specific regulation on transmission fees will take effect in the second half of this year. The government has also prepared sample contracts for the upcoming direct-sale trial, the person said.

He said the new regulation will integrate various direct-sale measures initiated by local governments.

The reform is aimed at establishing a clear and practical way to calculate transmission fees which grid companies charge.

China's power transmission market is monopolized by two grid companies - State Grid Corp of China and China Southern Power Grid.

The two state-owned firms purchase all electricity generated by China's power plants at prices set by the NDRC and then sell it on to end users.

But the duopoly faces opposition from power generators and users who accuse the grids of exploiting their unique position by charging a premium to real transmission costs.

飞雪寒冰

Local governments have been pushing for direct power purchasing to support local enterprises, especially energy-intensive smelters and miners who generate enormous tax revenues for local authorities.

In March this year, Beijing selected 15 electrolytic aluminum plants as part of a direct-sale trial.

Smelters involved in the scheme could purchase electricity directly from power plants at set prices and pay grids an unspecified transmission fee.  

But the trial failed due to the lack of transparency in these transmission fees. The grid companies were reluctant to disclose actual cost of transmission services and refused to make substantial concessions.

Zou Yiqiao, head of the price monitoring section at the State Electricity Regulatory Commission told Caijing in May that China is studying the possibility of independently setting a transmission.