2015-04-16

Guangdong Power Reform Success

It's not exactly the low hanging fruit, but it is fruit.

Caixin: Shenzhen Businesses Set to Save Money on Electricity Bills, Gov't Says
Guangdong's development and reform commission said businesses in Shenzhen will see price cuts of an average of 0.0843 yuan for every kilowatt-hour of electricity they use. The new prices will be applied retroactively to February's power bills.

Prices for industrial production and households will remain unchanged, the province's economic planner said.

Companies in Shenzhen pay as much as 1.03 yuan per kwh of electricity, among the highest in the country.

The commission said the price reduction is one of the achievements of a pilot reform of the city's electricity transmission and distribution system that started on January 1.

The three-year pilot was designed to let market forces, rather than transmission companies, determine prices, and peg the fees to the real costs of sending electricity from plants to users.
That's a hefty savings after only three months of reform, but it turns out the cost savings may be putting the cart before the horse:
A manager at a Shenzhen power plant said the latest price cut came only at costs of cutting Shenzhen grid's profit margins and investment plans and Shenzhen still needs to buy electricity at higher prices from the provincial grid.

Nevertheless, experts said the Shenzhen pilot will help officials work out rules and pricing mechanisms for transmission systems nationwide, and thus build a foundation for further liberalization of the sector. Beijing authorities ultimately hope to loosen the pricing influence of power transmission companies and let power plants sell directly to consumers.
Shenzhen power producers are being asked to do more with less. When they figure out how to do it, the plan will go nationwide.

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