A Study On The Regulation Reform Of China's Electric Power Industry

De-regulation and re-regulation have been taking place in electric power industry in many countries around the world. The reasons which brought to the reforms might arise from the changes of technologies, demand, economic constraints or political ideologies. The text-book restructuring model is to split the vertical monopoly, introduce competition to generation and retail sector, regulate transmission and distribution which bear the natural monopoly characteristics and build up an independent regulator. China's electric power industry restructuring plan (No.5) is of no big difference. But the deregulation practice did not follow the documental design and lag far behind the proposed plan. In oder to find out the causalities and explore a right path for the development of China's electric power industry, this dissertation based its research on the theoretical and empirical regulation studies, analyzes the regulatory history, framework and content from the multidisciplinary perspective of economics, law, administrative management.The author finds out that, China's electric power industry always takes the path: reform first and legislation second. The deregulation reform has not corresponding legal ground. To rely mostly on administrative power is not propitious for pushing forward the regulation reform. It is always accompanied by corruption and rent seeking. The regulation reform adjusts the interest among different groups. Without the legal authorization concerning the regulatory institution, function and process, the regulatory body will be at wit's end when confronting the pullback of the interest groups. State Electric Regulation Commission has issued some regulations concerning regulatory reform, while these documents do not have adequate constraints over the stakeholders because there is no commission from the upper law. From the study on the regulatory bodies, there exists widely that the allocation of regulatory function and institution design are not in accordance with each other. The decentralization of the regulatory functions is not made out of consideration for balancing the power but an inheritance for traditional plant supervision from central planning era. Moreover, the allocation between central and local government concerning regulatory function is not optimized as well. Regional protectionism and market segmentation become a prominent problem. The regulatory mode is generally in accordance with political system. The institution arrangement about the assessment criteria for local officer and revenue-sharing system motivate local government to intervene in markets. Currently the decentralized regulatory practice is of low efficiency and has the tendency to cause cahoots. From the study on the economic regulation of electric power industry, there exists discrimination concerning the market access towards private investors. There is no clear line among the function of enterprises, government and independent regulator. The market access criteria shall change gradually to planning, environmental protection and qualification audit. Electricy prices have been set by the government and used as a tool for macro-control. The price adjustment turns out to be the bargain between different interest groups. Without scientific pricing methodology, the electricity price can not response to the scarcity of energy, compensate the external costs, and balance the demand and supply. The generating sector has some extent of competition while transmission and distribution are still not splitted. The over investment behaviour in the recent 5 years of state owned electric companies shows the deficiency of the pricing system.Generally, the regulation reform of the electric power industry shall be accompanied by reforms in other areas. Otherwise, the impediment from institution and political process will slow down the progress. The reform in electric power industry shall be combined with establishment of relative laws, simplification of administrative process, introduction of competition and property right reform of state owned companies.