1. Policy and law

1.1  Government policy

The China National People’s Congress (NPC) approved the 12th Five-Year Plan (the 12-5 Plan) setting the national development strategy for the next five years (2011 to 2015) in March 2011. Important goals affecting the electricity sector in the 12-5 Plan include: protection of the environment and improved energy efficiency; development of clean energy; and energy conservation and clean energy cars among seven priority industries, the GDP contributions of which aim to increase from 2 per cent of GDP to 8 per cent by 2015. Reduced energy use is also a focused area in the 12-5 Plan and power industry investment is 5.3 trillion renminbi.

In July 2012, the State Council issued the 12th Five-Year National Strategic Development Plan of Emerging Industries (the Development Plan) setting forth a detailed road map for the development of clean energy industries, including nuclear power technology, wind power, solar energy and biomass energy industries. The Development Plan also puts forth schemes of integrated application of multiple new energy sources.

1.2  Legislative framework

The main law governing the electricity sector in the People’s Republic of China (PRC) is the Electric Power Law (1996). The Regulations on Electricity Regulation have been issued to strengthen and improve electricity regulation in 2005, focusing on maintaining the order of the electricity markets and promoting the development of the electric power industry.

In 2008, the Energy Conservation Law became effective in order to promote energy conservation. The amended Renewable Energy Law (2010) sets general principles on renewable energy.

Besides the above-mentioned laws, many other laws also apply in the electricity sector, such as laws relating to environmental protection, land reserving, urban-rural planning, water intake, construction, safety, price determination, etc.

In addition, there are numerous regulations and rules enacted by the State Council and the administrative authorities in charge to define specific procedures or particular issues with respect to electricity sector under the framework of the above-mentioned major laws and regulations.

All of these laws, regulations and rules also apply to the electricity sector in China, where some administrative departments are granted the authorisation to take charge of respective aspects in relation to electricity sector. To be precise:

  • development and reform commission of a competent level is in charge of the verification of the investment of an electricity project, and the approval of electricity price at both the on-grid end and sales end;
  • the department of environment protection, department of land and resources, department of housing and urban-rural development, department of water resources, as well as other relevant departments of a competent level are in charge of the approval on environment evaluation, land usage permits, planning permits and construction permits, water intake, and other permits or licences respectively;
  • the State Electricity Regulatory Commission (the SERC) is in charge of the technical standard and safety specification of the electricity sector, the supervision of the electricity market and the issuance of the Electric Power Business Licence; and
  • although power grid companies are not administrative authorities, they are empowered to manage the interconnection examination from technical perspective within their authorisation.

1.3  Alternative energy sources

The state prioritises the development and utilization of renewable energy and emphasizes the development of clean energy industries, including wind power, solar energy, biomass energy, nuclear power technology and cogeneration industries. The Development Plan also puts forth schemes of integrated application of multiple new energy sources.

The state encourages industrial enterprises to employ co-generation, make use of residual heat and pressure, use clean coal and adopt advanced technologies in monitoring and controlling the use of energy.

A renewable energy development fund is established with the state budget. The state grants tax benefits, and financial institutions may offer preferential loans with financial interest subsidies to renewable energy development and utilization projects that are listed in the National Renewable Energy Industrial Development Guidance Catalogue.

For renewable energy, it is required by law that grid operators buy all the on-grid power produced by a renewable energy IPP, to encourage the development of renewable energy.

1.4  Impact of government policies on climate change

As part of the government policies in response to climate change, the State Council has set the objective to reduce the energy consumption and to save 670 million tons of standard coal in the 12-5 Plan period. The State Council has also set the goal of adjusting the energy structure by promoting non-fossil energy consumption to reach 11.4 per cent by 2015 in primary energy consumption.

The reform of electricity price and environmental charge will also be advanced by the regulators. The government sets the schedule to practice the step-type prices for use of electricity by residents, perfect the peak-valley TOU power price policies and impose punitive electricity prices on enterprises and products that consume energy beyond the unit product energy consumption (electricity consumption) limits stipulated by the state and the regional areas.

Grid operators are obligated to reform the methods of power generation scheduling, preferentially schedule RPG and preferentially arrange the power generation of energy-conserving, environment-friendly and high-efficiency thermal power units.

In addition, the state has established a clean development mechanism fund to support constructions and industrial activities that are beneficial to strengthening proper responses to climate change.

1.5  Government policy on new nuclear power plants

The government only encourages cautious development of nuclear power plants on the condition of ensured safety.

Specifically, the Development Plan provides a cautious and prudent road map on developing the nuclear power industry with an emphasis on strengthening nuclear safety, nuclear fuel reprocessing and waste disposal technology research. Only under the premise of ensured safety may third-generation nuclear power plant construction be organized and carried out. By 2015, the operating nuclear power installed capacity is expected to reach 40,000GW.

  1. Regulatory authorities

2.1  Policy setting

The NPC is the top legislative body with the highest and the only authority to promulgate laws.

The State Council is the leading administrative unit responsible for implementing laws and policies of the NPC, and enacting regulations under the framework of the law.

The SERC, the NDRC, the NEC and the NEA act as regulators and monitors within their respective scope of administration to establish rules, measures and plans for electricity market operations under the framework of law and the State Council’s regulations.

2.2  Scope of authority

National level

The SERC acts as regulator and monitor of the electricity industry, including establishing rules for electricity market operations under the framework of the law and the State Council’s regulations, regulating the operation of electricity market, participating in stipulation and enforcement of safety and technical standards, issuing and administering power business licences, proposing tariffs and adjustments to the competent pricing department of the government, etc.

The NDRC studies and formulates policies for economic and social development, maintains a balance of economic aggregates and guides the overall economic system restructuring. The NDRC is not only responsible for formulating policy measures of energy development, but also administering and regulating the price policies.

The NEC is responsible for drafting the energy development strategy, considering energy security and development issues and monitoring implementation. While the NEC, chaired by the premier, is the highest authority overseeing energy issues, the general price-setting power for electricity resides with the NDRC.

The NEA is responsible for formulating and implementing energy development plans and industrial policies, promoting institutional reform in the energy sector, administering energy sectors, etc, and undertaking the daily work of the NEC.

Provincial level

Provincial governments can implement local pricing policies as there are regional sub-divisions holding local power delegated to them from the central government. Development and reform commissions at the provincial level are the key units responsible for formulating and implementing pricing policies for energy.

2.3  Establishment of regulators

The SERC is a statutory institution established directly under the State Council and empowered by the State Council to perform administrative and regulatory duties with regard to the national electric power sector. The NDRC is a macro economic management agency under the State Council. The NEC is a high-level discussion body or think-tank with ministerial rank and is the highest authority overseeing energy issues. The NEA is a unit under the NDRC, which also undertakes the daily work of NEC. The SASAC is a special organisation representing the state directly under the State Council to exercise ownership of state-owned enterprises.

All of the above regulators are governmental agencies.

2.4  Challenge and appeal of decisions

Generally, a specific administrative act (concerning, for example, revocation of the relevant licence, and approval, registration, interconnection of power grids, fair opening of power grids, etc) of the regulators can be challenged by filing an application with the superior regulatory body at one level higher in ranking for administrative reconsideration or initiating legal proceedings in front of the people’s court that has the jurisdiction. Administrative proceedings in front of the people’s court can also be initiated against a decision of administrative reconsideration entities.

Administrative reconsideration could be a mandatory procedure before a legal proceeding can be initiated in certain events. Moreover, under relatively rare circumstances, the administrative reconsideration decision is final and no legal proceeding can be filed after a final administrative reconsideration decision.

  1. UPDATE & TRENDS

On 15 May 2013, the PRC State Council promulgated the “Decision of the State Council on Removing and Delegating the Power of Approval of a Batch of Items Requiring Administrative Approval and Other Issues”. According to the Decision, the State Council has decided to delegate its power of administrative approval in respect of 117 items which include examination and approval of enterprise-invested hydropower station projects on non-major rivers, gas generation projects, coal-fired backpressure type thermal power project, wind power station projects, AC power grid projects at 330KV or below voltage level and non-cross-border and non-trans-provincial (autonomous region, municipal) AC power grid projects at 500KV voltage level. In addition, pilot program of direct purchase of power by power consumers from power generation enterprises (which should be approved by National Energy Administration) and examination and approval of share in the power market (By National Energy Administration) is now removed.