State Grid denies 5-way split reports

The key to electricity reform in China is managing electricity pricing rather than breaking up monopolies, an energy expert said Saturday, after China's largest energy distributor denied that it would be split into five parts.

Earlier reports said that China would split the monopolized State Grid Corporation of China into five independent regional grid companies, so that their competition could reduce a long-standing monopoly over China's electricity sector and perhaps even lead to a reduction of electricity prices.

Jia Fuqing, director of the institutional reform office at the State Grid, denied the report last week, saying that the company had yet to receive notification of any split, and there is no mention of such a move in the State Council's draft opinion on boosting economic restructuring.

If the current way of managing electricity prices does not change, the reform will not be truly realized, said Zhou Dadi, vice chairman of the China Energy Research Society.

It is hard to create competition among regional grids due to different power costs and power demands, Zhou said.

Some areas use more hydropower and some areas use more thermal or wind power, resulting in different costs. On the other hand, grid prices and prices for end users are not the same throughout the country. Therefore, it would be quite complicated to split the State Grid, Zhou said.

China saw a grid split in 2002, with China Southern Power Grid being split from the State Grid to take charge of power distribution in South China. But the split failed to engender competition between the two, according to Lin Boqiang, director of the Center for Energy Economics Research at Xiamen University.