The upcoming Third Plenary Session of the 18th CPC Central Committee in November is expected to bring significant economic decisions, with resource price reforms and power system changes being among the most anticipated. The electricity price reform, in particular, has drawn considerable attention as a key component of the broader energy market transformation.
Recent reports suggest that a new draft for electricity sector reform has been finalized and is set to be submitted to the National Development and Reform Commission (NDRC). This updated plan focuses on two major areas: promoting direct electricity purchases by large users and gradually establishing a market-based pricing mechanism. Additionally, it proposes restructuring power grid companies so that their income will be state-approved, and they will no longer act as intermediaries in buying and selling electricity.
Lin Boqiang, director of the China Energy Economic Research Center at Xiamen University, emphasized that the core of the reform is moving toward marketization. "The goal is to ensure that electricity prices reflect supply and demand, scarcity, and cost composition," he said. "Ultimately, this means breaking the existing monopoly structure in the power industry and introducing more competitive players."
With coal prices currently low and electricity supply relatively abundant, many industry experts believe this is an ideal time for power sector reform. Zhou Yanchang, an analyst at Dongfang Securities, noted that the current economic conditions—slower growth, low CPI and PPI—have created favorable external factors for reform. He pointed out that the profitability of thermal power plants has improved significantly due to falling coal prices, reducing the risk of sharp electricity price increases after reform.
Since the beginning of this year, a series of government policies have signaled a renewed push for power system reform. The "Opinions on the Key Work of Deepening Economic System Reform in 2013" clearly outlined measures such as simplifying tariff classifications, expanding the scope of equal pricing for industrial and commercial users, and promoting direct electricity purchases by large users.
Experts agree that the current environment presents a rare opportunity for meaningful change. However, challenges remain, including institutional barriers and vested interests that have long hindered progress. Shi Dan, deputy dean of the Institute of Finance and Economics at the Chinese Academy of Social Sciences, pointed out that previous attempts at reform were not successful due to misalignment with the market's development stage.
He stressed the need for the government to shift from administrative pricing to a more market-responsive approach. "If we don’t get accurate market signals, it’s hard to make effective policy decisions," he said. "Reforming electricity pricing is crucial to ensuring transparency and efficiency in the sector."
As the reform moves forward, the focus remains on how to implement these changes effectively. While the direction is clear, overcoming resistance from powerful stakeholders and ensuring fair competition will be critical. With the right policies and sustained effort, the path toward a more open, efficient, and market-driven power sector seems within reach.
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