China experiments with power market

BEIJING - In a groundbreaking move to liberalize the electricity generation market, China put into trial operation a regional power market in its northeastern provinces Thursday.

More than 20 power generation companies will compete with each other to supply electricity to local grids in northeast China, officials from the State Electricity Regulatory Commission (SERC) said. However, they also said the pricing system of the regional market has yet to be decided.

SERC Chairman Chai Songyue said the establishment of the northeast China regional electricity market marked a concrete step forward in China's reform of its power industry. The northeast China regional electricity market covers a total area of 1.2 million square kilometers, involving 100 million residents.

All the power trade will be conducted in an electricity trading center in Shenyang, capital city of northeast China's Liaoning Province. Payments will be made through local settlement centers in Liaoning, Jilin and Heilongjiang provinces.

China has accelerated the reform of monopolized industries such as telecommunications, electricity and civil aviation. China broke up the former State Power Corporation into 11 smaller companies in late 2002. In February 2003, the SERC went into operation. In the same year, China began an experiment with a regional electricity market in northeast China. The country is planning to set up six regional electricity markets in the next two to three years.

Chai said the establishment of competitive and open regional electricity markets will help meet the economy's growing demand for power. Rapid growth of the Chinese economy has generated huge demand for electricity. In 2003, 21 provinces, autonomous regions and municipalities in the country suffered electricity shortage. Local experts said the pressure was especially felt in certain areas and certain periods of time.

To solve this problem, China has increased investment in construction of new power plants and at the same time, accelerated the reform of power industry. Chai said as the first step of the establishment of regional power markets, the northeast China market will begin with electricity trade on monthly basis. In consequence, the market will gradually adopt other forms of trade, including real time trade and trade of electricity generation rights. As the market matures and the pricing system perfects, the regional electricity market will be fully open to competition, Chai said.

(Asia Pulse/XIC)