The National Development and Reform Commission (NDRC) of China has decided to extend a pilot scheme to liberalise retail electricity tariffs beyond Shenzhen and Inner Mongolia to the provinces of Anhui, Hubei, Ningxia and Yunnan. The pilot scheme gives local authorities more control over electricity transmission and distribution prices, which will be based on "cost plus a reasonable margin". The two largest grid operators, China Southern Power Grid and the State Grid Corp. of China, will have to separate their electricity transmission and distribution activities, a process which may take years to be completed.
In addition, China plans to launch spot trading platforms, over which qualified power generation companies and large consumers could set tariffs freely; the new power exchange would apply in a first stage to newly commissioned power plants. The NDRC will retain a price-setting role over tariffs for public utilities and residential users.
China started to overhaul its electricity market in 2002, when power generation and power transmission activities were separated, leading to the creation of five main power generation companies and two transmission grid operators.
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