Electricity pricing in a partial reformed plan system: The case of China

Electricity pricing in a partial reformed plan system: The case of China

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Article ID: iaor20122245
Volume: 43
Issue: 1-2
Start Page Number: 214
End Page Number: 225
Publication Date: Apr 2012
Journal: Energy Policy
Authors:
Keywords: economics, government
Abstract:

Despite three decades of reform, the electric power industry in China is still organised by a partial reformed plan system, where the investment to build capacity has been liberalised, but the prices and the production remain controlled by the state. This paper examines the pricing behaviour of the power supply in China, where the state attempts to balance the interest between the public and the electric power industry. The empirical evidence shows that the cost factors are critical to the electricity pricing in China, and that the bargaining mechanism, which sets the plan price, allows the power producers to face a soft budget constraint on their own costs.

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