China Southern Power Grid also stepped on the investment "brake": "Optimizing Investment and Cost Control Measures (2019 Edition)" proposed 20 key measures

In order to implement the decisions and arrangements of the Party Central Committee on state-owned enterprise reform and "living a tight life", consolidate and deepen supply-side structural reform, allocate resources scientifically and rationally, improve input-output efficiency, and achieve effective investment and optimal cost, the State Grid Corporation of China recently issued the "Measures for Optimizing Investment and Cost Control (2019 Edition)" (hereinafter referred to as the "Measures"), proposing 20 key measures, focusing on establishing a precise investment control system, implementing the optimal cost control strategy, and promoting the company and the power grid to shift from focusing on "speed and scale" to focusing on "quality and efficiency".

Adhere to benefit orientation and promote accurate investment in power grids

In recent years, in order to adapt to the rapid economic and social development, China Southern Power Grid has invested large amounts of money to upgrade urban and rural power grids, effectively supporting the rapid growth of electricity demand and the continuous improvement of power supply reliability and power quality. With the continued high investment scale, grassroots units have different degrees of problems such as focusing on investment and neglecting returns, focusing on project establishment and neglecting management. How to establish a precise investment management and control system, optimize resource allocation, further improve investment efficiency and benefits, and promote the company's high-quality development has become an urgent problem to be solved.

"China Southern Power Grid will adhere to strategic guidance and classified management and control. By building a resource allocation indicator system oriented towards goals and problems, establishing a dynamic coordination mechanism between development goals and resource inputs, and improving the resource input decision-making evaluation and accountability mechanism, we will create a precise investment management and control system with China Southern Power Grid characteristics to serve the national strategy and economic and social development." said Li Yong, head of the Planning and Budget Division of the Finance and Planning Department (Operation Supervision Center) of China Southern Power Grid.

The Measures point out that regulatory business should strengthen the whole process control of power grid investment and the construction of input-output mechanism. China Southern Power Grid will focus on the goal of building a safe, reliable, green and efficient smart grid, give full play to the leading role of the smart grid development plan, coordinate key tasks such as power growth, solving safety hazards, improving power supply quality, optimizing the business environment, and improving the level of intelligence, and take meeting the requirements of profit and asset-liability ratio control as hard constraints, and link indicators such as fixed asset sales per 10,000 yuan, average power outage time for customers, comprehensive voltage qualification rate, and major scientific and technological achievements with resource input, forming a resource allocation strategy for the network, province, prefecture (city), and county (district) to ensure the effectiveness of investment.

Non-regulated businesses should focus on optimizing their layout in the direction of strategic transformation. China Southern Power Grid will follow the business layout and implementation entities clearly defined in the company's development strategy, be market-oriented, highlight strategic synergy, and further strengthen the selection and post-evaluation of investment projects in emerging, international, and financial businesses by establishing a mechanism to link investment with profit, return on net assets, return on total assets and other indicators, strengthen post-investment management and asset operations of projects, and effectively support the company's transformation and development into an integrator of the energy industry value chain.

Adhere to classified management and control, and highlight cost-effectiveness

"Living a tight life" is a decision made by the CPC Central Committee and the State Council in light of the current changes in the domestic and international situation. At the 2019 work conference of China Southern Power Grid, specific requirements were also put forward to adapt to regulatory requirements, strictly control costs, and learn to "live a tight life". China Southern Power Grid issued the 2019 cost reduction measures to implement the "live a tight life" requirements, which is a major arrangement to adapt to the national policy of reducing general industrial and commercial electricity prices, actively reduce costs and ensure stable benefits. In the future, how to further strengthen lean cost control and actively expand the space for efficiency is a major issue facing power grid companies.

The Measures point out that the regulated business should be effectively linked to the government's transmission and distribution pricing cost supervision and audit, and the cost should be leanly controlled. China Southern Power Grid will continue to promote the deep integration of cost planning and business planning, improve the project-based cost management mechanism, accurately arrange production and operation projects by classification, strictly control intermediary consulting and outsourcing costs, continuously optimize cost investment, and eliminate waste.

Non-regulated businesses should benchmark against industry leaders and highlight cost-effectiveness. China Southern Power Grid will adhere to the principle of “spending based on revenue” for non-regulated businesses, linking productive costs with the scale of operating revenue, and ensure that the ratio of costs to operating revenue decreases year by year. At the same time, it will strengthen the management of non-regulated business cost benchmarking with peers, focusing on selecting indicators such as the ratio of costs to operating revenue, cost-profit margin, and total labor productivity to conduct diagnostic analysis and industry benchmarking, and strive to achieve industry-leading business costs.

Du Weilun, senior manager of the Planning and Budgeting Division of the Finance and Planning Department (Operation Monitoring Center) of the State Grid Corporation of China, said that the company will focus on optimizing investment and cost control, establish a correlation model between the scale of various resource inputs and core output indicators, and integrate the construction of input-output mechanisms throughout the entire process of investment and cost project control. It will promote the concentration of resources and factors in the key links and key areas of production and operation, continuously improve the efficiency of state-owned capital and corporate competitiveness, and support the company in accelerating the construction of a world-class enterprise with global competitiveness.

(Source: Dou Xiaobing, reporter of China Southern Power Grid News and China Southern Power Grid Media)