Electric reform program or landing within the year

The much-accepted reform of the power system suddenly accelerated in the near future. China Net Finance was informed that following Shenzhen’s first trial implementation of the transmission and distribution price reform in the country, relevant departments will continue to promote transmission and distribution prices in the well-to-do areas next year to carry out reforms.

“At present, the power surplus regions such as southwest and northeast are actively seeking to participate in the trials of transmission and distribution price reforms, and Inner Mongolia is also a relatively suitable area for pilot projects.” Informed sources said that "the transmission and distribution prices will still be based on the total revenue approval, that is, 'allowed costs + permitted earnings', the specific program will be based on the specific circumstances of the pilot area and be different."

The new electricity reform plan will be launched within the year as soon as possible. China Netcom Finance was informed that after repeated rounds of discussions and games, the new round of electric reform programs will be more balanced, scientific and operational, and will be closer to marketization. "Opening up the two ends, monitoring the middle" and "four years of liberalization and independence" are the basic principles for future electric reform.

The so-called “opening two ends and monitoring the middle” means the marketization of the operation behavior of power generation and power companies, while the intermediate power transmission links are subject to necessary supervision. A power expert pointed out that to use a metaphor, the grid in the middle part is a bit like a “highway,” and the cars (electricity) that are traveling between them need to be charged according to the approved price.

Market participants believe that the biggest beneficiary of the current round of electricity reform is the side of the sale of electricity after the release, and the local area power supply mains will most likely become the independent electricity sales side in the future. “Four open and one independent” refers to the opening of the electricity supply price other than the transmission and distribution, the opening of the electricity sales business, the release of incremental electricity distribution business, the public welfare and regulation, and the opening of the electricity supply plan. The trading platform is relatively independent.

According to the relevant deployment of the reform, the power system reform plan will strive to be introduced within this year. It is clear that the recent trial of Shenzhen's electrical reform has opened the curtain of reform. On November 4th, the National Development and Reform Commission issued the “Notice on the Implementation of Pilot Projects for Transmission and Distribution Tariff Reform in Shenzhen”, and officially launched the pilot reform of China's new round of transmission and distribution prices. It also means that the reform of the electric power system is being “pushed ahead of the pilot”. The pattern gradually pushed away.

The Shenzhen pilot indicates, to a certain extent, the path of future electric reforms, that is, after the establishment of an independent transmission and distribution tariff system, it actively promotes the marketization of electricity prices on the power generation side and the sales side; encourages the liberalization of competitive link electricity prices, and the transmission and distribution prices The power generation and sale price are separated in the formation mechanism; the on-grid price of the power generation enterprises participating in the market transaction will be determined voluntarily by the user or the market-based power sales entity and the power generation enterprise through voluntary negotiation and market bidding, and the power grid enterprise shall comply with the government's approved transmission and distribution prices. Net fee was charged; the price of electricity purchased by users participating in the electricity market was composed of market transaction prices, transmission and distribution prices (including losses) and government funds. Users who did not participate in the electricity market continued to implement government pricing.

According to the method of verifying the total revenue in the "Shenzhen Transmission and Distribution Pricing Reform Pilot Project", Shenzhen transmission and distribution prices are expected to usher in a slight downward adjustment before the end of the year. If the sales price adjustments follow the trend, the cost of electricity consumption in Shenzhen will be reduced. According to the pilot scheme, the transmission and distribution tariffs in Shenzhen shall be subject to preliminary supervision, and shall be determined in accordance with the method of cost plus revenue control. The method of verification for total revenue shall be “allowed income = permitted cost + permitted revenue + tax”. The first regulatory period is 2015. From January 1 to December 31, 2017. Before the regulatory cycle, Shenzhen should complete the calculation and reporting of the new transmission and distribution tariffs. China Net Finance was informed that the current measurement work is basically completed, according to the final calculation results, Shenzhen transmission and distribution prices may be slightly reduced.

GF Securities pointed out that in recent years, Guangdong Province has conducted research and attempts in the transmission and distribution price reforms, but due to various conditions, the independent and standard transmission and distribution pricing mechanism has not been established, and the progress of transmission and distribution price reforms has stagnated. Shenzhen has a good foundation for reform. As a pilot project for the reform of transmission and distribution prices, it is of great significance, which means that electric reform has begun to accelerate.

Han Xiaoping, Chief Information Officer of China Energy Network, told reporters that the reason why the pilot of the transmission and distribution reform was chosen in Shenzhen was because China Southern Power Grid itself was the experimental field for reform. On the other hand, Guangdong is also an area with marketized soil. The pilot point is also a breakthrough for the new electricity reform.

According to the electric reform program, electricity prices can be set directly between power plants and users, which means that the monopoly status of the grid is further weakened, which will have a profound impact on the power industry. Haitong Securities believes that large-scale promotion of direct purchase of electricity will encourage independent power plants to establish electricity retail companies, and users will purchase electricity from the retail companies to the power plants, which will greatly increase efficiency.

“The pattern of power supply has not changed in more than 10 years. Once the industry’s trillion-dollar sales revenue, assets, and hundreds of billions of profits have changed from the top down, it will be enough to create a large number of beneficiaries. And investment opportunities in the capital market. Therefore, the potential impact of electric reform on the industry needs special attention.” said Ye Xuchen, director of the Great Britain Securities Research Institute.

Ye Xuchen believes that in the short term, direct transactions between agricultural users, residents, and power generation parties are difficult. In direct power generation-side transactions that involve major industries, lower-cost thermal power plants will enjoy preferential policies, and higher-cost thermal power plants will face Increasingly severe competitive pressures. On the side of power sales, regional power supply companies are the main players, and may introduce social capital to engage in mixed ownership and participate in market sales. The opening of the power-selling business and the release of incremental power distribution businesses have enabled small-scale power grid companies that were originally confined to the development of one place to achieve expansion in other places. In the future, the industrial park may also become an independent power sales entity and participate in the power sales side reform. Both traditional power generation companies and new energy power generation companies may obtain electricity sales licenses.

Investors should pay high attention to the investment opportunities brought about by the new electricity reform. Several powerful institutional investment directors told China Netcom that the dividends of the new power reform will benefit the most from the low-cost thermal power plants. Take Inner Mongolia Huadian and SDIC as examples. At present, the on-grid electricity prices of the two thermal power companies are only 0.3 yuan per kilowatt-hour, which is much lower than other power generation companies. In addition, compared with hydropower, thermal power is not affected by seasonal factors. The annual power generation is at least 6,000 hours, while the hydropower is usually only 3,000 hours.