The Regulation And Competition Of Power Industry In China

There is an opinion in traditional theories that is the government must regulate the power industry by price and quality to prevent power enterprises from being low efficienct when they makes a strategic decision freely because of natural monopoly. Guided by traditional theories, almost all of the countries had taken the measure of the whole regulation on industries of natural monopoly, including the power industry, since 1950s. But with the development of economy, the power industy has become more and more inefficient,that is,there is a blind spot to depend on the effort of the government to solve all the questions of power industry. Developed countries began the reformation of regulation on power industry to make the situation change firstly, and the government encouraged rather than limitted the competition, and depended on the market to make up for the shortcoming of government. It should be note that this change showed significant effect, especially the price of power, it got the lower because of competition. But the reform caused some problems at the same time, especially when the power was in short supply, the market power would be an important reason for damaging the fair competition, even made the market paralyzed. So how to regulate and deregulate the power industry is always a difficulty issue.Traditional regulated model has not got well with the economy development, and must be changed. Watching from the experience of the countries all over the world, the model of regulation is showing a tendency from whole to part regulation, from endogenous to exogenous regulation, from protecting the monopoly to encouraging the competition. In view of the above, someone thought that the time of marketing the power industry has come. But the author doesn't think so because of shortcoming of the natural monopoly and positive transaction costs which leads to any incompletely valid aspect of governance and market. Deregulating to some extent with exogenous regulation system will improve the efficiency of market. Watching from the experience of the countries all over the world, no one could make the power industry marketing completely, that is worth paying attention to for China. In theory, deregulating completely is just not regulating. But when the fact is that, the power enterprises will do some things that are found out difficultly or unfettered by law.So the author thinks that incomplete regulation may be more efficient,and in the thesis,the author has set up a model to prove that.For that the reformation of Chinese power industry become better and better, the author brought up six pieces of advice.First is to confirm a target of reformation of power industry. In the market economy, deregulating is favorable to power market. But excessive deregulation will cause some problems,for example, rebuilding, disorder price, that is a problem of degrees. That needs a reasonable principle. The author thinks that good regulation system should abide by some following principles: dynamics;limitation; to measure the cost and profit.Second is to set up and perfect the regulation agency. The regulation agency of power industry is one that impliments and supervises regulaiton policy. The foreign experience shows that the agency is important. The author thinks that the government must take the efficient measures on the agency and system:keeping the agency dependent;seting up the agency at all levels;perfecting the monitoring system.Third is to carry out a path differentiate natural monopoly business father more from weak and strong among power-supply, power-sale, power-produce, and power-transmission. The most important thing is how to differentiate from the two. The author thinks that the scale economy is that the average cost began to reduce with the production increasing, and vice versa. So anyone can confirm that the scale economy is related to the average cost curve. Based on that conclusion, the government can divide the natural monopoly business to strong and weak easily,then the government can work out regulation measures on the order of succession. Forth is to normalize the competitive behavior and to reduce the access conditions. The restrains of government to economic field based on the invalid market expand the scope of intervene the economy, but the government ignored the self-answer of market. During the tenth five-years, Chinese government cleared the principle of reformation of the natural monopoly industry.Fifth is to perfect the pricing system of the power transmission. In China, the way of regulating the power industry is priced by government. Taking into account that asymmetric information and opened tendency may lead to the situation that optima] price of power can not be worked out, the urgent thing is that government must work out pricing system of power enterprises. The author thinks that transmission and distribution of power enterprise with natural monopoly character should change the traditional cost-plus regulation into incentive regulation.Sixth is to enhance the rule of law. It is important to legislate specially. The author thinks that the government should modify and perfect the law of power promulgated in 1995 as soon as possible to provide legal basis to regulation reformation of power industry. At the same time, matching law must be established as soon as possible.