National Development and Reform Commission Addressed the Doubt if Price Reform Is Equivalent to Price Hike, May Hand Over Authority of Power Pricing

Author: admin  Source: Shandong Province Electrical Equipment Installation, Maintenance, and Test Enterprise Association  Published time: November 24, 2009

“The core of resource product price reform lies in perfecting the pricing mechanism and optimizing resource allocation through pricing.” So was the answer by the National Development and Reform Commission, which addressed the doubt from some media if price reform is equivalent to price hike. And it added, “Our communications and publicity are not adequate.”

As revealed by the Commission, it is carrying out an extensive consultation for the Opinions of the State Council and CPC Central Committee about Deepening Electric Power Industry Reform (Draft for Consultation), which it is drafting. This implies that the Commission may finally hand over its power of pricing in a bid to promote the energy price reform.

As explained by the spokesperson of the Commission, change in prices is decided by the scarcity of a resources, demand and supply in the market, and the level of economic development in a certain period. Price adjustment and the transformation of the pricing mechanism are two sides of a coin. The resource product prices in China are relatively low, which is one of the important reasons for poorly-managed industrial operations and outrageous waste. On the one hand, the problem of unreasonable economic structure has been persistent for a long time in China, which is closely related to the low prices of resource products. Therefore, resource product prices fully reflecting the level of resource scarcity, demand and supply, and environmental costs are essential to changing the model for economic development and attaining healthy and sustainable economic development. On the other hand, as a direction of reform, a pricing mechanism based on demand and supply must be built gradually.

Given the power tariff just adjusted, the Commission vowed to “continue to intensify its efforts in reform and actively promote market-based power pricing,” while initially taking into account the measures in power generation, transmission and distribution, and power sales. Yesterday, Gao Huiqing explained, saying “the ultimate goal of the process of market-based power pricing is a market-based pricing mechanism, which is something the Commission has to overcome before proceeding to the next stage.”