Behind the rumors that "residential electricity price increases" are refuted, who will determine the electricity price

Shell Finance

2024-05-14 19:00Posted on the official account of Beijing News Shell Finance

The peak of electricity consumption in summer is imminent, and a rumor of "residential electricity price increase from June 1" quickly swept the attention.

On May 14, the staff of the 95598 hotline of the State Grid in Beijing and Shanghai told the Shell Financial Reporter that they had not received the relevant notice of electricity price adjustment, "for the time being, we have not received the relevant policy documents issued by the price department, nor have we received the relevant notice from the power supply company, and the electricity price adjustment information should not be true." The staff told the Shell financial reporter that generally speaking, before the electricity price adjustment, the power supply company will announce it in advance, and it is recommended to refer to the news announced by the official channel of the power supply company.

How is the residential electricity price priced? According to the Shell financial reporter, the residential electricity price implements the catalogue sales electricity price policy, that is, the government sets the price. Lin Boqiang, director of the China Energy Economy Research Center of Xiamen University, told the Shell Financial Reporter that the current electricity price standards implemented in various places are essentially a composite of the tiered electricity price and the peak-to-valley time-of-use electricity price.

In fact, compared with other countries in the world, the electricity price of mainland residents is low, and the price of industrial and commercial electricity is high. In recent years, policy signals to promote residential electricity price reform are not uncommon, but it is still difficult to implement. Industry insiders believe that the trend of reform is inevitable, but it is not clear when and how it will be carried out.

The rumor of "residential electricity price increase" was refuted, and who determines the electricity price

A rumor that "the price of residential electricity will increase from June 1" quickly swept the attention and was refuted by many places.

On May 14, the staff of the 95598 hotline of the State Grid told the Shell Financial Reporter that the relevant policy documents issued by the price department have not been received, nor have they received the relevant notices from the power supply company, and the electricity price adjustment information should not be true.

The staff member said that generally speaking, before the adjustment of electricity prices, the power supply company will announce it in advance, and it is recommended to refer to the news announced by the official channels of the power supply company.

As an important daily expenditure in household consumption, how is the residential electricity price determined?

Residential electricity prices are not determined by marketization, but by power grid companies to ensure supply, and implement the catalogue sales price policy, in other words, by the government. The National Development and Reform Commission has made it clear that all localities should give priority to low-cost power supply to ensure the use of electricity for residents and agriculture.

As for how to determine the specific price of electricity for each kilowatt-hour of residents, Lin Boqiang, director of the China Energy Economy Research Center of Xiamen University, told the Shell Financial Reporter that the current electricity price standards implemented in various places are essentially the compound of the tiered electricity price and the peak-to-valley time-of-use electricity price. The tiered electricity price system is based on the amount of electricity consumed by residents, and the peak-to-valley time-of-use electricity price encourages residents to arrange their electricity consumption time reasonably, arranging larger electricity demand in the evening and other periods when the power supply is sufficient and the electricity price is low.

According to the electricity price list for domestic use of domestic electricity in Beijing announced by the Beijing Municipal Development and Reform Commission in August 2023, the monthly electricity consumption of residents is divided into three levels, and the electricity price is increased in different grades. The first level of electricity is 240 kWh and below, and the electricity price standard is 0.4883 yuan/kWh (less than 1 kV) and 0.4783 yuan/kWh (1 kV and above).

Source: Beijing Municipal Development and Reform Commission official website

According to the sales price table of Shanghai residents publicized by the State Grid, the electricity price of residential users in Shanghai is 0.617 yuan/kWh during peak hours (6-22 o'clock) and 0.307 yuan/kWh during valley hours (22 o'clock - 6 o'clock the next day) in the first tranche of 0 to 3120 kWh electricity range.

Source: State Grid

Due to the livelihood security attribute of residential electricity, the electricity price in many places has not changed for a long time.

The staff of the 95598 hotline of the State Grid confirmed to the Shell Financial Reporter that the electricity consumption of residents in Shanghai currently continues to implement the residential catalogue electricity price promulgated and implemented in 2012.

Residential electricity price reform is still on the way

Residential electricity price reform has been a topic of discussion for many years, but it is not easy to implement it in practice.

2021 was the year with the most obvious policy signal of residential electricity price reform in recent years.

According to an international comparative analysis of mainland electricity prices released by the State Grid Energy Research Institute in March 2021, at the international level, compared with the 35 member countries of the Organization for Economic Co-operation and Development (OECD), compared with countries with emerging economies, and compared with the United States, mainland electricity prices are at a low level.

According to the analysis, in 2019, the average residential electricity price in 35 OECD countries was 1.352 yuan per kilowatt hour, and 0.542 yuan in mainland China, accounting for only 40% of the average level of 35 countries and ranking second to last among 36 countries.

In 2019, the average residential electricity price in the 35 OECD countries for which public data is available was 1.53 times that of the industrial electricity price, and the residential/industrial price of the mainland was 0.85 times, ranking second to last among the 36 countries.

In June 2021, the National Development and Reform Commission (NDRC) replied in response to netizens' comments that for a long time, the mainland has experimented with lower residential electricity prices, and the residential electricity prices are significantly lower than the cost of power supply, because industrial and commercial users bear the corresponding cross-subsidies. Compared with other countries in the world, the mainland residential electricity price is low, and the industrial and commercial electricity price is high.

"In accordance with the requirements of further deepening the market-oriented reform of electricity prices, the next step is to improve the residential ladder electricity price system, gradually ease the cross-subsidy of electricity prices, make electricity prices better reflect the cost of power supply, restore the commodity attributes of electricity, and form a residential electricity price mechanism that more fully reflects the cost of electricity, supply and demand and resource scarcity." The NDRC said in the above reply.

After the foreshadowing, in July 2021, the National Development and Reform Commission issued the Notice on Further Improving the Time-of-Use Electricity Price Mechanism, focusing on further improving the peak-to-valley electricity price mechanism, including improving the peak-to-valley electricity price mechanism, reasonably determining the peak-to-valley electricity price difference, and establishing a peak electricity price mechanism, etc., without involving the adjustment of the amount of electricity and electricity prices of each grade of the tiered electricity price.

The reason why it is difficult to make substantial progress in the reform of residential electricity prices, according to Lin Boqiang, on the one hand, is that residential electricity involves people's livelihood and is more sensitive, on the other hand, the overall proportion of residential electricity consumption is relatively small, and the corresponding urgency of reform is weak.

According to the data of the National Energy Administration, the electricity consumption of the whole society in 2023 will be 9,224.1 billion kilowatt hours, of which the domestic electricity consumption of urban and rural residents will be 1,352.4 billion kilowatt hours, accounting for only 14.66%, and the remaining 85.34% of the electricity consumption will all come from the primary, secondary and tertiary industries.

Although the rumors of electricity price adjustment have been proven to be untrue, they can cause widespread public concern or the possibility of pushing up inflation.

Song Xuetao, chief macro analyst at Tianfeng Securities, wrote in May that since 2016, utility prices have fluctuated less, and the CPI (consumer price index) for hydropower fuels has been fluctuating in a range of around -1.3% to 4.5% year-on-year. According to the estimation of residents' cash consumption expenditure, hydropower fuel accounts for about 5% of residents' consumption, of which electricity is the majority, and electricity, gas and water account for 3.9%, 1% and 0.2% of residents' consumption respectively. The low volatility and low share have meant that the contribution of utility prices to CPI has tended to be no more than 0.3 percentage points in the past.

Song Xuetao told the Shell financial reporter that the rise in the price of utilities such as water, electricity and gas will not push up inflation. First, the arithmetic result is that utility prices contribute very little to inflation, and second, the increase in utility prices will be absorbed by households through consumption behaviors, such as reducing usage.

Beijing News Shell Financial Reporter Zhu Yueyi

Edited by Yue Caizhou

Proofread by Liu Baoqing

View original image 534K

• 

•