Full steam ahead on energy reform

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Last updated at: (Beijing Time) Friday, October 31, 2003

Full steam ahead on energy reform

The energy industry's watchdog said recently it is sticking to its plans to develop regional power markets to boost competition among generators.

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The energy industry's watchdog said recently it is sticking to its plans to develop regional power markets to boost competition among generators.

Reports have circulated that reforms by the State Electricity Regulatory Commission had stalled in the wake of recent massive blackouts in Europe and North America.

The government had reportedly urged the commission to take more time to safeguard the security of electricity supply when pushing through its market overhaul.

Experts have also expressed concern that it may take more time than planned to introduce competition to the new markets, given more than half of the nation is grappling with electricity supply shortages.

In the proposed regional power markets, electricity generators are expected to be stripped off their guaranteed rates of return. They will have to sell part of their electricity through "power pooling" or competitive bidding system.

Chang Jianping, an official with the commission, said it is studying the proposals for setting up the regional markets and hopes to finish planning by the end of this year.

"We are still sticking to the timetable of creating pilot regional markets in East China and Northeast China in the first quarter of next year," said Chang on the sidelines of an industry workshop.

Chang said the commission would pay more attention to security of electricity supply when designing the markets, to avoid similar system failures to those in other countries.

He also said the market, if designed properly, could be effective even during supply shortfalls.

In June, the commission said it planned to build integrated regional markets in East China, Northeast China, Central China, Northwest China and South China within three years.

The commission hopes the move will intensify competition in these markets. It also expects to break down barriers to the exchange of power between different provinces in the same region.

But analysts doubted whether it is possible to boost competition, given the current power shortage is expected to continue in many places for two or three years.

"I think it will take longer to set up a mature regional market. We need more than three years to increase the power reserve margin to a healthy 30 per cent," said Joseph Jacobelli, an analyst with Merrill Lynch.

In September, State Grid Corp, the nation's largest power transmission and distribution company, established a regional power grid subsidiary in Northeast China - a milestone in the move towards the first integrated regional energy market.

The regional grid company was formed by consolidating local grid firms in Northeast China, including Heilongjiang, Jilin, Liaoning provinces, and Chifeng and Tongliao in the Inner Mongolia Autonomous Region.

The registered capital of the regional grid company is 27.2 billion yuan (US$3.3 billion).

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