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New policy will emerge

The NDRC source emphasizes that energy price levels are the key focus of assessments in order to prepare for policy adjustments.
 
In June of 2006, the NDRC upped the average price for electricity to 0.025 yuan kw/h on average. High-energy-consumption industries will continue to be targeted with tiered energy price regimes in order to accelerate industry upgrades and halt their blind and rapid growth.

From that point until April this year, the NDRC and Electricity Supervision Committee (ESC) jointly have issued prohibitions on local government handing favorable energy prices to local industry.

But the results haven't been satisfactory. The NDRC and ESC have found that local government does not have enough incentive to charge more for pollutors because presently, any revenue made beyond what would have been made according to the previous prices goes straight to the central government.

Therefore, the NDRC and ESC are working on a plan to earmark this extra income for industry re-structuring, energy conservation, and emissions reduction.

"The policy has passed discussion, and [we] estimate that it will face the public very soon," the source said. "The assessments have two purposes. One is to figure out how local governments are actually implementing tiered pricing; the other is to get a sense of their attitudes toward the new policy.

According to a report on electric power supply and demand released by the Chinese Electric Power Industry Institution (CEPII), in first quarter of 2007, Chinese electric power productions maintained rapid growth— 4 percentage points higher than 2006, at 15.5 percent.

You Min, chief of the development division of CEPII, has said, "From the beginning of this year, the supply and demand of electricity will be basically balanced. There will appear surplus in some areas." Because of growth in power production from January to May, investments fixed assets in cities and towns grew 25.9 percent. 

Zhou Fengqi, a researcher in the energy division of the NDRC, said that a surplus in electric power will only spur more investment in high-energy-consumption industries. Since China's electricity is mainly generated by thermal power, which itself is a high-energy consumer and highly polluting, implementing tiered energy pricing is a direct way to address these issues.