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Back To Square One On Energy Roundabout

Updated on Mar 13, 2008 – SCMP

The decision to establish an energy commission brings efforts nearly back to a full circle, writes Eric Ng in the first part of a series looking at reforms

The State Council’s decision to establish a national energy commission instead of a ministry puts China’s energy administrators just short of completing a full circle.

And, as in most government restructuring, it has raised more questions than answers, with bureaucrats still fighting for whatever power they can grab before the dust settles.

“As the power and responsibilities of various regulatory bodies have not been unveiled, it is hard to tell what will be in store for us,” said Xie Yifu, a senior engineer at the planning and development department of China Power Investment Corporation, one of five state-owned electricity firms.

“However, the establishment of the energy commission has elevated the importance and independence of energy in the government structure, which should be positive to the industry as it theoretically would help balance the interests of different energy sectors.”

History suggests reform is a never-ending cycle.

China first established a ministry of energy in 1988, amid strong opposition from leaders in the then ministry of coal. But the “super regulator” only lasted five years and was disbanded in 1993, with the ministry of coal reinstated.

In 1998, the ministry of coal was again hammered, downgraded to the coal industry commission. It was subsequently abolished in 2001.

The former state development planning commission, now the National Development and Reform Commission (NDRC), assumed overall regulation of the oil, gas, power and coal sectors.

Calls for the re-establishment of the ministry of energy surfaced as early as 1999.

It was suggested that it should be complemented by an independent energy regulatory commission, modelled after the United States’ Federal Energy Regulatory Commission, as China explored the deregulation of energy pricing and the establishment of free markets to enhance efficiency.

However, no energy ministry was formed during the last major government reshuffle in 2003. Beijing decided instead to set up the State Electricity Regulatory Commission (Serc), allowing power prices to be the first subject of the deregulation experiment. It maintained its tight grip on petrol and gas prices.

Once again this week, the idea of a ministry was too much for the factions within the energy sectors to swallow. The latest reshuffle involves the amalgamation of functions from the NDRC’s Energy Bureau and the State Council’s Office of the National Energy Leading Group.

The Energy Bureau is responsible for industry policy and setting prices as well as project approvals, while the leading group has taken charge of the drafting of the long-awaited energy law and the mainland’s foreign energy co-operation strategy.

The end result was the abolition of the leading group and the establishment of a symbolic National Energy Commission, with day-to-day execution carried out by a National Energy Bureau under the NDRC.

The bureau has taken on administrative power over the nuclear energy sector, formerly held by the Commission of Science Technology and Industry for National Defence.

The move will help elevate the importance of nuclear energy in China’s power mix as it strives to reduce reliance on coal to address pollution problems. NDRC vice-chairman Zhang Guobao said this week the commission was studying raising the nation’s 2020 target for nuclear generation capacity to 60 gigawatts, up from 40GW.

Analysts said the latest reshuffle was no big deal.

“The change is not substantial. That said, I think the best that came out of this round of reform was the direction for the NDRC to reduce micro-management and projects approval, and to concentrate on macro planning,” said Lin Boqiang , from Xiamen University’s Centre for China Energy Economics Research.

“In most countries, bureaucrats tend to feel that they have power only if they have the right to approve concrete projects. Setting strategy doesn’t give that sort of empowerment feeling,” he said.

How much power will be siphoned off to lower-level governments remains to be seen.

Beijing-based energy consultant Robert Blohm said: “It’s like they are just putting everything in a sketch just to get the approval of the National People’s Congress. The details will come as the fighting [for power] continues.”

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