Experts Call for Price Reform in Electricity Industry

China's top economic planning body is seeking public opinion on a plan to charge for residential electricity usage on a tiered basis.

While hailing the move as a way to save energy and balance resource distribution, experts are calling for expanded price reform throughout the electric power industry.

CRI's Zhao Kun has the details.
In its proposed plan for pricing reform, the National Development and Reform Commission has set three tiers for power usage charges.

Households would be charged according to these tiered rates, instead of the uniform rate currently charged.

Chang Yaohua, a 32-year-old Beijing resident, says she will try to control her family's electricity consumption if the new plan is implemented.

"It will affect our lives. We have been very economical in electricity use, especially during the summer, and I will try to keep our electricity use below the lowest tier if the reform is implemented."

Experts point out that besides saving energy and protecting the environment, the price reform will also help balance the distribution of national resources.

Lin Boqiang is director of the China Center for Energy Economic Research at Xiamen University.

He says the government currently subsidizes residential use of electricity, so the new plan would help put government funds to better use.

"The current single electricity pricing system is unfair and inefficient. For example, with everyone paying the same price for electricity, families with higher incomes tend to consume more than low-income households, thus they enjoy more government subsidy. However, the government subsidization, as a national resource, should be more available to low-income people. In this regard, the tiered electricity pricing mechanism is primarily for solving this problem."

As a senior advisor to China's top economic planning body, Lin Boqiang calls the proposed price mechanism a modest move and also a breakthrough in residential electricity pricing reform.

However, he says what the country really needs is an overall price reform in the power industry, citing power shortages seen in many areas across the country as an example.

"The proposed reform can take some effect in solving this problem as it helps increase profits for power companies and save energy as well. However the effect is minor. We see many places face severe power shortages; many power companies suffer great losses. To solve these problems, the electricity price, for both residential and non-residential use, should be linked to the floating price of coal. It should be adjusted according to the market, not determined by the government."

Lin Boqiang says such reform is especially important for industrial upgrades and the development of a sound market environment for the power industry.

However, the expert adds that the move would also expose a major dilemma for the Chinese government. That is: how to reach energy efficiency targets without undermining living standards and adding to inflationary pressures.

For CRI, this is Zhao Kun.