This month China flipped the switch on a new electricity pricing model that treats all businesses as favorably as large industrial users while continuing to subsidize costs to residential and agricultural customers. The changes are intended to bring fairer and more transparent rates as well as more efficient distribution throughout the world’s largest power grid, reports Caixin.
In a notice released on May 15, the National Development and Reform Commission established the “cost plus reasonable profit” principle for calculating power transmission and distribution fees, breaking down the components of the total charges and allowing grids to pass through certain costs to users for the first time. The change should help the operators to calculate their costs more precisely, reasonably limit their profit margin, and boost investment efficiency.
Another change in the notice is to remove the fee category for large-scale industrial users—one of four classes of customers for which different charges are set. The other three groups of consumers are residential, agricultural, general commercial and industrial. Agricultural users pay the lowest rates while general commercial and industrial users pay the highest. Rates for large-scale industrial users, which include businesses with transformer capacity in excess of 315,000 volt-amps, are significantly below those for general commercial and industrial customers.