The independent operation of the power trading center is accelerated

The National Development and Reform Commission and the National Energy Administration recently clearly listed the independent equity ratio and timetable for power trading institutions:

In the first half of 2020, the shareholding ratios of power grid companies in two regional trading institutions in Beijing and Guangzhou and other trading institutions all fell below 80%, and further fell to below 50% by the end of 2020.

Before the end of 2022, trading institutions in the Beijing-Tianjin-Hebei, Yangtze River Delta, Pearl River Delta and other regions will be integrated with each other, and an electricity market that meets the requirements of regional economic integration will be initially formed.

Recently, 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 "Opinions"), which clearly stipulates the specific requirements, implementation paths, and other contents for the independent and standardized operation of power trading institutions.

In August 2018, the National Development and Reform Commission and the National Energy Administration issued a "Notice on Promoting the Standardized Construction of Power Trading Institutions", which pointed out that only eight power trading centers are joint-stock companies, and the rest are wholly-owned subsidiaries of power grids. It stipulated that the shareholding reform of each power trading institution should be completed before the end of December 2018.

However, the shareholding reform of power trading institutions failed to be completed as scheduled. So far, only 10 power trading centers in Beijing and Guangzhou, Guangdong, Shanxi, Hubei and other regions have completed the shareholding reform; 6 power trading centers in Tianjin, Jiangsu, Hunan and other regions are in the process of shareholding reform and capital increase, and Gansu Power Trading Center has reduced its registered capital in preparation for the shareholding reform.

The release of the Opinion immediately sparked heated discussions. What changes will this share reform bring to the power market? What role will power grid companies play in the power trading center? Where will the power trading center go?

Regional electricity market may gradually take shape

The above-mentioned "Opinion" clearly lists the independent equity ratio and timetable of power trading institutions: in the first half of 2020, the shareholding ratio of power grid enterprises in the two regional trading institutions in Beijing and Guangzhou and other trading institutions will all be reduced to below 80%, and by the end of 2020, the shareholding ratio of power grid enterprises will be reduced to below 50%.

According to the reporter's statistics, among the 10 power trading institutions that have completed the share reform, the power grid enterprises in Kunming Power Trading Center hold the least shares, accounting for 50%, while the shareholding ratios of power grid enterprises in other trading centers range from 66.7% to 80%. In the power trading centers that are currently increasing their capital, power grid enterprises hold between 70% and 80%.

The Opinion also points out that by the end of 2022, trading institutions in the Beijing-Tianjin-Hebei, Yangtze River Delta, Pearl River Delta and other regions will be integrated with each other, and an electricity market that meets the requirements of regional economic integration will be initially formed.

Zhan Shuguang, a lawyer at Beijing Xinnuo Law Firm, believes that the Opinion may be a prelude to the formation of a regional power market. "Take the Beijing-Tianjin-Hebei region as an example. As early as August 11 and 12, 2016, the power load of various provinces and cities in North China reached new highs. The North China AC regional power grid was uniformly operated and controlled, and successfully passed the two-day regional maximum load without increasing installed capacity or financial subsidies. Therefore, the regional power market is of great significance in terms of both economy and safety."

An industry expert who declined to be named agreed: "Regional markets are still the focus of top-level design, but implementation is currently constrained. Regional resource optimization will not only expand the scope of optimization, but will also significantly improve the operating efficiency, safety, reliability and regulation performance of the power system."

Hu Rongquan, vice president of the Comprehensive Smart Energy Professional Committee of the China Electric Power Technology Market Association, predicted: "In the next step, as the national unified power market is gradually built, the two cross-regional trading centers in Beijing and Guangzhou are expected to merge to establish a national unified power trading center."

Trading agency executives are becoming more diverse

It is understood that the power grid company is the largest shareholder of the power trading center, and the management personnel of the trading center are all appointed by the power grid company. Therefore, the power trading center is widely criticized for reflecting the will of the power grid. Will the role of the power grid in the power trading center change after the release of the "Opinion"?

Zhan Shuguang believes that the shareholding of power grid enterprises has dropped to 50%, and absolute control has become relative control. The control power has gradually weakened, but the influence is still the greatest in the short term. For power generation enterprises, they will have the opportunity to become members of the market management committee in the future, and they are likely to serve as senior executives of the trading center, and their right to know will be greatly enhanced.

"The market-oriented employment mechanism of the trading center is the direction of reform, just like senior management of the stock exchange. The "Opinion" also pointed out that ordinary staff will be selected and hired in a market-oriented manner from 2020. The situation where senior management of trading institutions comes solely from power grid companies will change, and power trading centers will be more independent, fair and standardized." Hu Rongqian said.

The above-mentioned industry experts believe that power grids should gradually withdraw from power trading institutions. "Power grid companies should focus on being power 'logistics companies'. Internationally, power grid companies are not necessary shareholders of trading institutions and dispatching institutions."

It is worth mentioning that the Opinion clearly defines the specific positions of trading institutions, market management committees and dispatching institutions for the first time, ending the five-year debate on their functions. The Opinion clearly states that trading institutions are currently responsible for medium- and long-term electricity trading and assisting in organizing electricity spot trading; dispatching institutions are currently responsible for electricity spot trading and are mainly responsible for the production command of the power system.

As an important part of power grid enterprises, there has been a long-standing debate on whether dispatching agencies will be independent. Hu Rongquan believes that if the power trading center truly realizes independent and standardized operation, the dispatching agencies of power grid enterprises will also be shareholding in the future, and the ownership and operation rights of power grid assets will also be separated.

The above-mentioned industry experts said that in China, power dispatching agencies essentially undertake the functions of power resource allocation and power safety. The safety functions can be retained in the power grid. After the power resource allocation function is transferred to the spot market, these personnel should be unified with the trading institutions.

The role of market management committee members should be strengthened

In addition to personnel independence, the "Opinion" puts forward specific requirements for finance and materials: the asset management relationship should be clarified. For example, if the trading institution cannot immediately divide the shared information system, trading system and other assets with the power grid enterprise at this stage, their continued use must be approved by the market management committee. The trading institution's use of assets that cannot be divided in one step must be placed under the supervision of the market management committee.

The Opinion clearly states that trading institutions with shared assets cannot charge transaction fees for the time being. The relevant fees are included in the overall transmission and distribution price, but need to be listed separately. Qualified trading institutions may charge transaction fees with the consent of the market management committee, without sharing assets with power grid companies.

Zhan Shuguang suggested that on the basis of the independence of personnel, finance and materials, equity should also be independent. "The equity of power trading institutions should be directly owned by the State-owned Assets Supervision and Administration Commission, the State Council State-owned Assets Supervision and Administration Commission or the local state-owned assets supervision and administration commission, or at least a platform enterprise directly under the State-owned Assets Supervision and Administration Commission. The platform enterprise and the original shareholders of the trading institution, such as the power grid enterprise, should be equal units."

In addition, the Opinion strengthens the role of the Market Management Committee, requiring it to be responsible for preliminary review of rules and assist relevant government departments in supervising and correcting irregularities of trading institutions. It clarifies that the Market Management Committee is independent of trading institutions, and that members of the board of directors of trading institutions may not concurrently serve as members of the Market Management Committee. It also promotes fairness in the Market Management Committee by establishing a term limit and limiting the maximum number of consecutive terms that the chairman can serve.