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China plans power trading exchanges to free up electricity prices

[BEIJING] China is planning to set up two regional power trading exchanges as part of efforts to free up electricity prices, now set by the government, an official said on Thursday.

China's top economic planning agency, the National Development and Reform Commission (NDRC), is currently in talks with power firms and the country's two state grid firms to set up the two exchanges in Beijing and Guangzhou. "We are studying matters related to opening power trading centres in Beijing and Guangzhou, and there are also studies into setting up other provincial-level trading organizations,"an NDRC spokesman, Shi Zihai, told reporters.

He gave no details.

China aims to break the power sales monopoly held by the two state grid firms, the State Grid Corporation of China and the Southern Grid Corporation. It has already launched pilot reform programmes in seven provinces that allow generators to reach sales agreements directly with consumers.

The Southern Grid manages power transmission and distribution in five southern regions. The State Grid is responsible for the rest of the country.

Mr Shi said the government was drawing up further plans to free up the power market in pilot regions, which include the hydropower-rich southwestern provinces of Yunnan and Guizhou as well as Inner Mongolia and Ningxia in the coal-producing northwest.

He said six new policy plans, to be released soon, would establish rules for power transmission and distribution, setting power prices and organising and operating the new exchanges.

China's power industry is in the doldrums as a result of waning industrial growth. Power output has fallen 0.1 per cent in the first 10 months of the year, according to the National Bureau of Statistics.

With demand weak and new capacity still coming on line, power supplies were expected to remain in surplus for the next two to three years, the China Electricity Council said in a report published at the end of last month.