China’s National Development and Reform Commission recently said that the price of electricity for residential use has been low for a long time and that the future should restore the commodity properties of electricity and better reflect the cost of supplying it. The move indicates that the price of electricity for 1.4 billion people is likely to be raised in the future.
According to Reuters, the NDRC said in response to a netizen’s query that residential electricity prices have been low for a long time and are substantially lower than the cost of electricity supply because of the corresponding cross-subsidies borne by industrial and commercial users. And compared with other countries, China’s residential electricity prices are on the low side and commercial and industrial electricity prices are on the high side. Therefore, in accordance with the requirements of deepening the market reform of electricity prices, the next step is to improve the residential tiered electricity price system, to alleviate the cross-subsidy of electricity prices, so that the price of electricity better reflects the cost of power supply, restore the commodity properties of electricity.
The report said the NDRC did not elaborate on how it will reform residential electricity prices, though analysts believe the statement from the NDRC actually signals the need for higher residential electricity prices.
The report said China currently has a three-tier electricity tariff based on electricity consumption, with the more electricity used, the higher the price. The first two steps account for nearly 95 percent of customers, and the highest one involves only about 5 percent of residential customers.
In Beijing, the residential tariff for the first tier is RMB 0.4883 per kilowatt hour, the second tier is RMB 0.5383, and the third tier is RMB 0.7883.
The average commercial and industrial tariff is RMB 0.635 per kilowatt hour, while the average residential tariff is RMB 0.542. It is unclear whether the difference between the commercial and industrial tariff and the residential tariff indicates a cross-subsidy from commercial and industrial customers.
The report also said that the NDRC’s statement comes on the heels of several recent power outages caused by power shortages in Guangzhou, a key industrial production base in China. And authorities have launched an investigation into record-high coal prices that have raised the cost of power generation. In a separate statement Monday, the NDRC said some thermal power plants in China’s northern Ningxia region are under pressure to close because of high generation costs and low electricity prices.
Some analysts said the NDRC’s motive for this residential tariff reform is to boost power companies’ revenues and ease pressure on the power industry after higher supply chain costs this year, the report said.
Separately, Radio Free Asia reported that the NDRC’s response about making residential electricity prices market-oriented sparked negative comments from netizens. Sina Weibo netizen message wrote, “water, electricity and coal and communications, railroads, you all underwrite, and then said the price is low, the price above that we do not market, monopoly to do up also do not see you want to market, double standard to shameless”.
There are also commentators said that the authorities in the year when the construction of the Yangtze River Three Gorges power station promised that the cost of electricity can be reduced to a few cents a degree, but now each degree of electricity costs more than 50 cents, and residents of household income is disproportionate.