Authorities have approved the electricity prices agreed between large power consumers and power producers in a trial scheme for direct power purchase in the southwest Yunnan province, suggesting that the province will lead the country in adopting market-based pricing, the China Securities Journal reported Tuesday, citing unidentified sources.
Some industry insiders said the approval means Yunnan has begun comprehensive reform of its power system. Heavy users, especially those in the electrolytic aluminum sector that sees power tariff account for half of total cost, are expected to benefit from lower power costs.
According to the provincial government’s policy, besides the direct purchase price between users and operators, the price set for power transmission and distribution tariff is 0.105 yuan per kilowatt for power supplied with 110 kilovolt and 0.086 yuan for 220 kilovolt, in addition to the basic 0.125 yuan per kilowatt. Users will also pay contributions and surcharges to the related government fund. The aggregated price paid is seen to be under 0.4 yuan per kilowatt, compared to 0.5 yuan currently paid by large industrial firms.
The government has so far only chosen Yunnan and the Inner Mongolia Autonomous Region for trial on the ground as both provinces have more power supply than demand and lower on-grid power prices, suitable for promoting market pricing, the report said.
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