The State Council recently officially approved the Opinions of the National Development and Reform Commission on the 2011 Key Tasks for Deepening Economic System Reform. According to this opinion, promoting the reform of resource product prices will become the focus of economic restructuring this year. The opinion puts forward that it is necessary to promote the price reform of resource products such as refined oil, electricity and natural gas, and to implement the electricity price for residential electricity.

Since June 1st, the price adjustment of electricity prices in 15 provinces and cities nationwide has opened the curtain for the reform of resource-price products this year. The industry believes that the reason why the relevant departments raise the price of electricity in the situation that the national inflation situation has not eased is that the urgency of the current power shortage has exceeded the short-term inflationary pressure. By the same token, if the inflation situation eases in the second half of this year, the price increase of resource products is urgent, and the pace of reform of the country's resource price products will inevitably accelerate.

Increase the possibility of implementing ladder price

The "Opinions on the Key Tasks of Deepening the Economic System Reform in 2011" pointed out that this year we must choose the opportunity to implement the residential electricity price.

In October 2010, the National Development and Reform Commission announced the “Guiding Opinions on the Implementation of Ladder Electricity Prices for Residents' Living Electricity (Consultation Draft)”. In the draft for comments, the NDRC divides the monthly electricity consumption of residents into three grades that meet basic electricity demand, normal and reasonable electricity demand, and higher quality of life. This opinion draft gives two ladder pricing options. In Option 1, the first gear is determined by the monthly average electricity consumption of 70% of the households. In Option 2, the first gear is determined by the monthly average electricity consumption of 80% of the residents.

The industry believes that under the current situation of tight electricity consumption, the State Power Administration has placed special emphasis on mitigating power shortages through demand side management, and the ladder electricity price as an effective means to ease the demand side is extremely likely to be gradually introduced this year.

Cai Guoxiong, deputy chief engineer of the State Grid, believes that under the overall power shortage this year, the possibility of a timely introduction of stepped electricity prices will increase. At present, from the technical point of view, there is no difficulty in the introduction of the ladder price. However, he also said that the ladder price is simply to suppress the demand for electricity through price levers, and it is not possible to combine the demand side electricity with the peak and valley power conditions of the grid. Since it is impossible to guide residents to use the valley electricity at night, it is impossible to improve the electricity efficiency of residents. He suggested combining the ladder price with the time-of-use tariff.  

Water price or timely adjustment

The "Opinions on Deepening Economic System Reform in 2011" mentioned that this year we must actively promote water price reform, and rationally formulate water resource fee collection standards and water supply prices for water conservancy projects. It is widely believed in the industry that as the country implements the most stringent water management system, both residential and industrial water prices may be raised in due course this year. Since the decision-making power of the water price reform is in the price departments of various places, the upward adjustment will be carried out separately in different regions.

The relevant person in charge of the National Development and Reform Commission has said that in 2011, the resource price reform should start from the water price, actively carry out the pilot work of water price cost, create favorable conditions for deepening the water price reform, and explore effective ways for the price of electricity, gas and oil. .

Like the ladder price, the ladder water price has been regarded by the industry as one of the directions for the future development of the water price mechanism reform. The so-called ladder water price, that is, a certain amount of the total amount of water for residents or enterprises in a certain period of time, on which different grades are set. The more water consumption, the higher the water fee collected.

Luo Jianhua, secretary-general of the Chamber of Commerce of the National Federation of Industry and Commerce Environmental Services, said that the ladder water price has been explored for many years. Some years ago, some people proposed to write the ladder water price into the water law, but then it was rejected by the relevant departments because of immaturity.

Luo Jianhua believes that there are still some technical difficulties in implementing the ladder water price. For example, who will pay for the cost of replacing the water meter. But the ladder water price will undoubtedly be a direction of water price reform. Especially in terms of industrial water use, this year’s Central Document No. 1 proposed to implement the most stringent water resources management system. If the provinces implement the quota of water resources to enterprises, the part exceeding the quota will have to pay a higher price. To a certain extent, it is the ladder water price.

Prior to this, Shi Yubo, Director of the Urban Water Department of the Department of Water Resources of the Ministry of Water Resources, revealed that the Ministry of Water Resources is formulating the Opinions on Implementing the Strict Water Resources Management System. At present, the 10 ministries have been signed and will be reported to the State Council after further revision. The latest situation that the China Securities Journal reporter learned is that the opinion has been finalized and will be reported to the State Council for approval by the General Office of the Ministry of Water Resources. This opinion sets a specific upper limit on the total amount of water used by provinces, autonomous regions, and municipalities directly under the Central Government. Shi Yubo said that the document only requires the total amount of water resources of the provincial level. As for how the provincial authorities can decompose these indicators, whether they will control the total amount of key water users in order to complete the total target, it depends on Specific measures of the local government.

The industry believes that the future implementation of total control of key areas and key water enterprises will be a trend. On this basis, after the use of water indicators for related enterprises is completed, the newly added water consumption can only be satisfied by the transfer of water rights and the use of non-traditional water sources, which inevitably raises the cost of water for enterprises, and the possibility of introducing a ladder of water prices is highly likely.

For the reform of residential water price, Jin Yongxiang, general manager of Dayue Consulting, believes that the increase in water price has its inevitability. The main reason is that the water price of most urban residents cannot cover the cost of municipal water supply. In particular, in recent years, some areas have started construction for the safety of water supply. Drinking water projects have led to an increase in the cost of water supply enterprises. It is more difficult to rely solely on existing water prices to cover water supply costs. As the water quality standards for unfunded water increase, the cost of municipal water supply will increase further.

In addition, in recent years, part of the funds of local financing platforms have been invested in drinking water projects. If local governments do not raise the price of residential water to ensure the profitability of these projects, then the debt of platform companies will face the risk of being unable to repay.

"Of course, the cost of water companies is high. A large part of the reason is that these enterprises are inflexible, with many employees and high management costs. According to the NDRC's water price cost supervision and management method, the water price is mainly declared by the enterprises themselves, and the supervision is very difficult. Many companies have passed this part of the cost to the cost of water, which indirectly pushes up the price of water. How to eliminate these unreasonable costs is a deep-seated system problem." Jin Yongxiang said.

The industry believes that whether it is industrial water or the increase in the price of residential water, for water companies, it will be a big plus. Under the relevant policies of total water resources control and water rights transfer, the sewage treatment industry will become the “creator” of water use indicators. This will greatly expand the market space for wastewater treatment companies, thus bringing new profit growth points to the already slowing sewage treatment market.
  Refined oil natural gas brewing price change

The Opinions on the Key Tasks for Deepening Economic System Reform in 2011 also pointed out that it is necessary to actively promote the market-oriented reform of refined oil prices, establish a natural gas price formation mechanism that reflects the scarcity of resources and the relationship between market supply and demand, and further rationalize natural gas and alternative energy. Price relationship.

Last year, the National Development and Reform Commission issued a draft for the reform of the refined oil pricing mechanism to major domestic oil companies. In addition to shortening the price adjustment interval of refined oil products from the current month to 10 days, the opinion draft also intends to decentralize the pricing power of refined oil products. There are two options to choose from. One is to decentralize the pricing power to the three major oil giants. The NDRC entrusted the intermediary company to issue a price adjustment notice.

It is reported that the relevant departments have submitted the refined oil price reform plan to the State Council, but it has not been approved. Although the final plan has not been approved, the shortening of the price adjustment cycle and the reduction of the rate of change of the three places have reached a high level of consensus at the market level.

In terms of natural gas price reform, it is reported that the National Development and Reform Commission will raise the ex-factory price of natural gas in the second half of this year. At present, in the international market, the price of natural gas is equivalent to 60% of the price of isothermal crude oil, while China is only equivalent to a quarter. China's natural gas prices are less than half of imported natural gas.

Wang Zhen, dean of the School of Business Administration of China University of Petroleum, believes that the demand for natural gas is growing too fast, and the price of natural gas is too low, making it difficult to solve the supply security problem for a long time through domestic production and import methods. Therefore, adjusting natural gas prices and their price management policies is inevitable. Only by rationalizing the price formation mechanism can we solve the problem of gas shortage fundamentally.

At present, the ex-factory price of onshore natural gas in China is formulated by the National Development and Reform Commission according to the cost plus reasonable profit and considering the relationship between supply and demand. The price of natural gas pipeline is also formulated by the National Development and Reform Commission. For the pipeline of local construction, the price of the pipeline can be authorized by the competent department of price under the State Council. It is formulated by the provincial price department; the city gas price is set by the provincial price department, and there is no market-based price formation mechanism.

Li Dianqi, deputy general manager of PetroChina Sichuan Sales Chengdu Branch, believes that as a scarce resource, the future price increase of natural gas will be a long-term trend. Since natural gas consumption accounts for only about 3% of China's primary energy consumption, the formation of natural gas price mechanism must be later than refined oil. In the future, as the proportion of natural gas in primary energy consumption gradually rises, the mechanism for the formation of natural gas prices will be put on the agenda as soon as possible.
 

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