Strengthening the State Electricity Regulatory Commission

The Commission's Responsibility

Under the Regulations, the Commission has two basic responsibilities: supervision and administrative enforcement in the power sector. It is to maintain order in the power market, protect the interests of power investors, operators and users and the public interest, and to safeguard a safe power system. It may set up regional sub-commissions upon approval by the State Council. Currently, the Commission has six regional sub-commissions throughout the country.

To avoid a conflict of interest, the officials of the Commission and its sub-commissions may not work at any power enterprise and dispatch centre.

The Regulations enumerate nine areas of responsibility for the Commission. In summary, the Commission is to supervise and regulate: issuance and use of various business permits in the power sector; compliance with technical rules, safety and market rules in power generation, transmission, dispatching and trading; market share of power generation enterprises to prevent monopolies; quality of product and service by electricity distributors; and electricity tariffs.

Notably, the Commission has not been set up to approve investment projects in the power sector. Such approval authority still remains with the NDRC.

Another important area in which the Commission does not seem to have a real say is electricity tariffs, although this is part of its enumerated responsibilities. Under the Regulations, "the NDRC and the Commission" supervise and regulate electricity tariffs. The wording that puts the NDRC ahead of the Commission is highly significant. The NDRC has been the pricing control authority in China, e.g., the electricity tariff in almost each power plant project requires its (or its local counterpart's) approval. Each year the NDRC system approves electricity tariffs; this has been very important for power investors and many others. The power to regulate the electricity tariff is indispensable to effective regulation. Thus at the creation of the Commission, there was some expectation that the Commission could be armed with this power. The current wording in the Regulations is a compromise between the NDRC and the Commission. Unfortunately, it is not clear how this power sharing is to work.

There is some scepticism that the Commission will not meet its targets without the above two major powers. However, it is unlikely that this situation will change any time soon.

The Commission's Enforcement Powers

The Regulations empower the Commission and its officials with quite a few administrative enforcement powers, such as investigation, seizure, issuance of warnings, revocation of permits, power to fine, and confiscation of illegal proceeds. In particular, the Commission and its sub-commissions may request power enterprises to disclose their records, data or other information within the Commission's jurisdiction, and their officials may enter into the premises of power enterprises to investigate and seize evidence.

The Commission is also authorized to mediate and adjudicate disputes between power plants and power grids relating to plant-grid connections, or disputes between power grids relating to grid connections, if such a dispute obstructs electricity transactions. The wording is not quite clear if this authority only covers the failure of the parties to reach the initial connection agreement or also covers other related disputes. While not spelled out in the Regulations, the Commission's decisions on such disputes are an administrative adjudication and subject to petition for review by a higher authority or administrative litigation proceedings.

Overall, the Regulations enable the Commission to take more affirmative measures and to formulate further rules to implement its supervisory and regulatory functions under the Regulations.