Promoting the independent and standardized operation of power trading institutions is a long-term process

On February 18, the National Development and Reform Commission and the National Energy Administration issued the "Implementation Opinions on Promoting the Independent and Standardized Operation of Power Trading Institutions" (hereinafter referred to as the "Implementation Opinions"). In 2019, Liu Dunnan's team, deputy director of the Energy Internet Research Center of North China Electric Power University, undertook the project "Research on Promoting the Independent and Standardized Operation of Power Trading Institutions" commissioned by the National Energy Administration. The following is their interpretation of the implementation opinions.

Q: What is the significance of the shareholding reform of power trading institutions? What is the goal?

Liu Dunnan: We should promote the independent and standardized operation of power trading institutions. "Independence" and "standardization" complement each other. Business "standardization" is the goal, and institutional independence is one of the means to ensure standardization.

The ultimate goal of the reform is to achieve business norms. By standardizing the various businesses of power institutions, the rights of various market entities to participate in market transactions fairly can be guaranteed, which is conducive to promoting the deepening of power market reform. Institutional independence is one of the means to ensure business norms, and shareholding reform is a sign of institutional independence.

Q: The power grid companies still have equity advantages in this shareholding reform, but after encouraging the introduction of social capital, what impact will this have on the relevant rules of power market transactions? How much say will the latter have?

Liu Dunnan: According to the implementation opinions, the basic rules for power trading and cross-provincial trading rules are formulated by the National Development and Reform Commission, the National Energy Administration, and the Ministry of Finance, and the provincial trading rules are formulated by the National Energy Administration and relevant departments of local governments. After being reviewed and approved by the Market Management Committee, they are approved and implemented by the Energy Bureau and government departments. Trading institutions are the executors of market rules and can put forward suggestions for improving power trading rules and regulations, but they have no right to formulate and change market rules.

In the power trading business, there is no inherent connection between the equity of an institution and the right to make rules. Regardless of the size of the equity, it should be regulated. At present, some of my country's trading institutions are wholly owned by the power grid, and some have been joint-stocked since their establishment. In the past few years, there has been no situation where wholly owned trading institutions are unfair to multi-share institutions in terms of rule design.

According to the implementation opinions, the trading agency, market management committee and dispatching agency are jointly responsible for the management of power trading related businesses. The three have different functional positionings. Simply put, the trading agency is the organizer of market transactions, the executor of market rules, and provides various professional services for market entities.

The Market Management Committee is mainly responsible for discussing various trading rules, coordinating government and major decision-making, dispatching agency safety verification, power grid operation and transaction results implementation.

Q: Some market players have reported that the disclosure of information such as power data is still very insufficient. What do you think of this issue? Are there any corresponding requirements for shareholding reform?

Liu Dunnan: Market information is divided into public information for the society, public information for market entities, and private information disclosed to individual entities. For the problems reflected by market entities, on the one hand, the information disclosure rules of the market need to be improved; on the other hand, it also depends on the capacity building of the information system. Currently, many users only have electricity metering, and cannot collect and measure electricity curves. The collection, processing, analysis and push of a lot of data depend on the gradual improvement of the level of informatization, which is a process.

The implementation opinions also proposed to "improve the information sharing and security guarantee mechanism", and the dispatching agency should provide the trading agency with accurate and timely public data required for market transactions. The issue of information disclosure is actually not necessarily related to the shareholding system. The content, detail and disclosure cycle of information disclosed to market entities are also part of the market rules. The trading agency is responsible for disclosing information in accordance with market rules.

Question: In relevant documents in 2015, the power trading agency proposed "relatively independent operation", and in 2019 it proposed "independent and standardized operation". What signal does this change send?

Liu Dunnan: The independent and standardized operation of power trading institutions is a very high-level goal, but this goal cannot be achieved overnight. Objectively, it needs to be achieved in steps and stages.

2015 was the first year of the new electricity reform. The cultivation of market players had just begun, and users and power generation companies were still learning what the electricity market was. The "Administrative Measures for the Access and Exit of Power Sales Companies" was not promulgated until one year later, and the incremental distribution network had not yet appeared... Therefore, in 2015, in order to promote the smooth start of the electricity market reform, it was the right choice to establish a relatively independent power trading institution based on power grid companies. In 2019, in order to further deepen the electricity market reform and promote the independent and standardized operation of power trading institutions, it is also the right choice.

It should be noted that promoting the independent and standardized operation of power trading institutions is conducive to improving the credibility of power trading institutions and ensuring the fairness and justice of the market. However, promoting the independence of power trading institutions does not mean blindly requiring them to completely separate from market entities, especially power grid companies. Instead, reasonable paths should be set according to actual conditions to gradually improve the independence and standardization of power trading institutions. The implementation opinions put forward reform goals for the three stages of 2020, 2022 and 2025. Promoting the independent and standardized operation of power trading institutions is a long-term construction process.

Q: How do you think we can achieve true “independent and standardized operation”?

Liu Dunnan: First of all, who should it be independent from? It should include the following three entities: first, the trading center should be independent from all market participants including power grid companies; second, it should be independent from the dispatching center; and third, it should be independent from government departments.

Secondly, how to regulate independently? Compared with the past "relatively independent" status quo, trading institutions should do the following to operate independently and in a standardized manner: (Introduced in reverse order from five to one in terms of promotion steps and reform difficulty)

Fifth, business independence. The power trading center must clarify its business and demarcate its responsibilities with the dispatching center, power grid companies and government departments. This work has been continuously promoted since the establishment of the trading institution.

Fourth, the independence of "equity". Electricity trading institutions should achieve equity diversification, which is also the current situation.

The third is the independence of "things". The office space, infrastructure, materials and equipment of the trading institutions need to reflect independent operation. At this stage, data resources, information systems, trading systems, etc. can be shared with power grid companies after approval by the market management committee.

The second is financial independence. Financial independence is an essential key link. Foreign power trading institutions have three main models: collecting membership fees, transaction fees, and relying on power grid companies. my country will promote the reform of transmission and distribution prices and gradually achieve financial independence of trading institutions.

First, the independence of "people". The independence of personnel relations, the right to recruit personnel, and the right to appoint and dismiss personnel are the core contents of the independence of trading institutions. In view of my country's national conditions and the problems that arise in current trading management, it is necessary to make reasonable adjustments and arrangements for the unit level of trading institutions and the career development channels of trading institution personnel, and to establish a scientific, reasonable and competitive salary distribution mechanism.

To achieve the standardized operation of power trading institutions, four links should be built: first, establish a complete system of rules and regulations for the standardized operation of trading institutions; second, form a comprehensive supervision, management and evaluation system. Third, improve the information disclosure system and increase the transparency of the operation of power trading institutions. Fourth, build a smooth feedback channel to urge the rectification of irregular behaviors of trading institutions.