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The tiered pricing system， after being applied to the electric power supply in China， now is to work for the waster supply as well. In several provinces， the tiered pricing for gas has been experimentally carried out in several cities of China. All these changes foretell the overall spread of the tiered pricing system in the energy and resource consumption of Chinese people. Another constant trend in the energy consumption market of China is that the prices of oil， gas and electricity are becoming more and more market-oriented.
In comparison， the reform to the entire energy structure is seeing much slower progress. For example， the electricity reform， which is the most headachy for the reformers， has no new direction or guideline. The gas reform is approaching the market， but there is also a great space for improvement.
In addition， the market-oriented price system and the tiered pricing system to secure people’s livelihood actually require the systematic changes to the energy industry as the two represent different goals. It is still a question worth exploration to find the balance between being market-oriented and securing people’s livelihood.
The Market-Oriented Price
The price of the domestic energy consumption， represented by the use of coal， gas， oil and electricity was always controlled by the government till recent. Previously， the prices of the natural gas and electricity were considered to be severely retorted， failing to reflect the scarcity of the resources and their true value.
The reform to energy started as of the 1980s. Turning the price formation system from being government-controlled to being market-based was the reform ideology fixed at the beginning. However， 30 years has passed and the market-oriented pricing system is far from being established， especially in some key energy departments.
The coal is the first sector having seen the formation of market-oriented pricing system. Before 1993， the price of coal was completely under the grasp of the government. As of 1994， the prices of coals for generating electricity and metallurgy were open to the market. Then the market-oriented price began to find its place in the coal deal market.
However， such a progress was met with more problems than congratulations， because it directly caused the contradictions between the coal suppliers and electricity suppliers that were not solved until now. For this， the government began to apply the guiding prices for the coal for electricity generation. At the end of 2012， the government pegged the electricity price with the coal price， allowing the electricity suppliers to change the power price based on the fluctuations of the coal price. By then， the purchasing fair of coal was completely cancelled and the formation system for coal price had become completely marketoriented. The reform in the oil sector is later than the coal. After restructuring China National Petroleum Corporation （CNPC） and China Petroleum & Chemical Corporation （Sinopec）， the Chinese government initiated the reform to the prices of crude oil and refined oil in 1998， relating their prices to the international market. However， the international crude oil went through a great decrease soon after the initiation. Fearing the heavy loss， the Chinese government stopped the reform， which has not been fully finished by now.
In 2003， the Chinese government changed the way of connecting the oil price to the international market. The price of crude oil was to be built upon the domestic market while the refined oil was to be formed based on the international crude oil market in addition to the processing expenses， transportation cost and tariffs. In 2006， this system was further improved.
The main change in 2006 was the setup of the supporting systems， including the regulatory mechanism for the upper and lower sectors， the subsidies for difficult industries， and the price linkage mechanism. Concretely， enterprises which are affected by the change of oil price can receive the subsidies and they are allowed to change the prices of their products reasonably based on the oil price. They also built the special oil gain levy， which was commonly called the “tax over huge prices”， to charge the tax over the income brought by the increased price of crude oil.
The oil price system was improved again in 2013 as the period for price adjustment was shortened from one month to one week and the adjustment was to be initiated once the conditions are met. The pricing system of refined oil has basically become market-oriented.
The natural gas price was once connected to the oil price without an independent pricing system. In 2011， the new pricing system based on the “net back value of the market” was carried out in Guangxi and Guangdong.
In 2013， this system began to be spread to the entire country. Such a method is to work out the factory price and the price for each provincial hub based on the end-user price. Such a system is also applicable to the categories of the energy with similar heat value with the natural gas.
The electricity reform is much more complicated. It started as of 2002， but only a part of the initial goals had been completed by 2013. There were too many contradictions and vested interest groups in the section of electricity pricing system， which resulted in the stagnant progress. A governmental official taking part in the design of the program for electricity reform said that the electricity price was highly related to many things， including the home appliance and the urban construction. Therefore， the reform to the electricity pricing is the key. The future activities will be centered around the goal of making it marketoriented.
Tiered Pricing for People’s Livelihood
The industry is a big consumer of the energy. Therefore， it is necessary for various practitioners in the industry to contribute to the offset of the energy consumption. But the ordinary people’s lives cannot leave the energy as well. Therefore， the change to the pricing system of energy will definitely affect their lives.
How to lower the impact of the alteration to the energy prices over the ordinary people’s lives？ In China， the hearing system is adopted. Every time before the adjustment of energy price， a hearing will be held to collect the opinions and advices of ordinary people.
The hearing system does not have the function of deciding the price. In the past， the price of energy for ordinary people kept increasing. Therefore， the hearing was passed for a “fake” or “useless” link that was set up to cheat the citizens.
Actually， there were cases in which the hearing gave out the requests of lowering the energy price. But the number of these cases was quite small and the price increase was always placed under heavy scrutiny. Chinese people are sensitive to the prices， especially the prices of electricity， gas and oil which they need to use every day. Therefore， any increase in energy price will be considered to enhance the burden for ordinary people.
In order to correct this misunderstanding， the tiered pricing system was introduced as of 2011. In 2012， the electricity price took the lead in using the tiered pricing system. Though there are some disputes about the details， the first tier of the electric power， which is the lowest， is able to cover most of the citizens. This can promote the thrift of electricity and secure the livelihood of low-income groups.
At the end of 2013， the National Development and Reform Commission published a document about further improving the tiered pricing system for the electricity price， which added the stipulations about the subsidies to those in great and dispensable need of massive electricity usage.
Then， there are different opinions towards the detailed rules of the tiered pricing system for the electric power. Lin Boqiang， director of the China Resource & Energy Research Center at Xiamen University， said that there was no big gap between the electric quantities and prices of different tiers， which might not highlight the necessity of saving the electric power. The water is the latest sector to have tiered pricing system work in China. As the central government required， the tiered pricing system for water usage of citizens will be fully implemented this year. The supply of resources has already marched into the age of “tiered pricing”， in which the price of the resources/energy unessential for the daily life is deter- mined by the market.
And then what are the resources/energy unessential for the daily life？ The Chinese government is still working to find an answer， say， to find a set of proper indices to distinguish different tiers. According to Xu Shaoshi， director of the National Development and Reform Commission， the main goal of various governmental departments was to distinguish what is essential and what is unessential to further improve the tiered pricing system for the gas， electricity and water usage of ordinary people.
The Chinese government also has requirements for the supporting policies， such as the consummation of the hearing system， the enhancement in the reasonability and transparency of the government-based pricing， the improvement in the social assistance and security and the mechanism of relating the energy price with the CPI. All these requirements， as Xu Shaoshi said， are to provide better guarantee for the livelihood of low-income groups.
In comparison， the reform to the entire energy structure is seeing much slower progress. For example， the electricity reform， which is the most headachy for the reformers， has no new direction or guideline. The gas reform is approaching the market， but there is also a great space for improvement.
In addition， the market-oriented price system and the tiered pricing system to secure people’s livelihood actually require the systematic changes to the energy industry as the two represent different goals. It is still a question worth exploration to find the balance between being market-oriented and securing people’s livelihood.
The Market-Oriented Price
The price of the domestic energy consumption， represented by the use of coal， gas， oil and electricity was always controlled by the government till recent. Previously， the prices of the natural gas and electricity were considered to be severely retorted， failing to reflect the scarcity of the resources and their true value.
The reform to energy started as of the 1980s. Turning the price formation system from being government-controlled to being market-based was the reform ideology fixed at the beginning. However， 30 years has passed and the market-oriented pricing system is far from being established， especially in some key energy departments.
The coal is the first sector having seen the formation of market-oriented pricing system. Before 1993， the price of coal was completely under the grasp of the government. As of 1994， the prices of coals for generating electricity and metallurgy were open to the market. Then the market-oriented price began to find its place in the coal deal market.
However， such a progress was met with more problems than congratulations， because it directly caused the contradictions between the coal suppliers and electricity suppliers that were not solved until now. For this， the government began to apply the guiding prices for the coal for electricity generation. At the end of 2012， the government pegged the electricity price with the coal price， allowing the electricity suppliers to change the power price based on the fluctuations of the coal price. By then， the purchasing fair of coal was completely cancelled and the formation system for coal price had become completely marketoriented. The reform in the oil sector is later than the coal. After restructuring China National Petroleum Corporation （CNPC） and China Petroleum & Chemical Corporation （Sinopec）， the Chinese government initiated the reform to the prices of crude oil and refined oil in 1998， relating their prices to the international market. However， the international crude oil went through a great decrease soon after the initiation. Fearing the heavy loss， the Chinese government stopped the reform， which has not been fully finished by now.
In 2003， the Chinese government changed the way of connecting the oil price to the international market. The price of crude oil was to be built upon the domestic market while the refined oil was to be formed based on the international crude oil market in addition to the processing expenses， transportation cost and tariffs. In 2006， this system was further improved.
The main change in 2006 was the setup of the supporting systems， including the regulatory mechanism for the upper and lower sectors， the subsidies for difficult industries， and the price linkage mechanism. Concretely， enterprises which are affected by the change of oil price can receive the subsidies and they are allowed to change the prices of their products reasonably based on the oil price. They also built the special oil gain levy， which was commonly called the “tax over huge prices”， to charge the tax over the income brought by the increased price of crude oil.
The oil price system was improved again in 2013 as the period for price adjustment was shortened from one month to one week and the adjustment was to be initiated once the conditions are met. The pricing system of refined oil has basically become market-oriented.
The natural gas price was once connected to the oil price without an independent pricing system. In 2011， the new pricing system based on the “net back value of the market” was carried out in Guangxi and Guangdong.
In 2013， this system began to be spread to the entire country. Such a method is to work out the factory price and the price for each provincial hub based on the end-user price. Such a system is also applicable to the categories of the energy with similar heat value with the natural gas.
The electricity reform is much more complicated. It started as of 2002， but only a part of the initial goals had been completed by 2013. There were too many contradictions and vested interest groups in the section of electricity pricing system， which resulted in the stagnant progress. A governmental official taking part in the design of the program for electricity reform said that the electricity price was highly related to many things， including the home appliance and the urban construction. Therefore， the reform to the electricity pricing is the key. The future activities will be centered around the goal of making it marketoriented.
Tiered Pricing for People’s Livelihood
The industry is a big consumer of the energy. Therefore， it is necessary for various practitioners in the industry to contribute to the offset of the energy consumption. But the ordinary people’s lives cannot leave the energy as well. Therefore， the change to the pricing system of energy will definitely affect their lives.
How to lower the impact of the alteration to the energy prices over the ordinary people’s lives？ In China， the hearing system is adopted. Every time before the adjustment of energy price， a hearing will be held to collect the opinions and advices of ordinary people.
The hearing system does not have the function of deciding the price. In the past， the price of energy for ordinary people kept increasing. Therefore， the hearing was passed for a “fake” or “useless” link that was set up to cheat the citizens.
Actually， there were cases in which the hearing gave out the requests of lowering the energy price. But the number of these cases was quite small and the price increase was always placed under heavy scrutiny. Chinese people are sensitive to the prices， especially the prices of electricity， gas and oil which they need to use every day. Therefore， any increase in energy price will be considered to enhance the burden for ordinary people.
In order to correct this misunderstanding， the tiered pricing system was introduced as of 2011. In 2012， the electricity price took the lead in using the tiered pricing system. Though there are some disputes about the details， the first tier of the electric power， which is the lowest， is able to cover most of the citizens. This can promote the thrift of electricity and secure the livelihood of low-income groups.
At the end of 2013， the National Development and Reform Commission published a document about further improving the tiered pricing system for the electricity price， which added the stipulations about the subsidies to those in great and dispensable need of massive electricity usage.
Then， there are different opinions towards the detailed rules of the tiered pricing system for the electric power. Lin Boqiang， director of the China Resource & Energy Research Center at Xiamen University， said that there was no big gap between the electric quantities and prices of different tiers， which might not highlight the necessity of saving the electric power. The water is the latest sector to have tiered pricing system work in China. As the central government required， the tiered pricing system for water usage of citizens will be fully implemented this year. The supply of resources has already marched into the age of “tiered pricing”， in which the price of the resources/energy unessential for the daily life is deter- mined by the market.
And then what are the resources/energy unessential for the daily life？ The Chinese government is still working to find an answer， say， to find a set of proper indices to distinguish different tiers. According to Xu Shaoshi， director of the National Development and Reform Commission， the main goal of various governmental departments was to distinguish what is essential and what is unessential to further improve the tiered pricing system for the gas， electricity and water usage of ordinary people.
The Chinese government also has requirements for the supporting policies， such as the consummation of the hearing system， the enhancement in the reasonability and transparency of the government-based pricing， the improvement in the social assistance and security and the mechanism of relating the energy price with the CPI. All these requirements， as Xu Shaoshi said， are to provide better guarantee for the livelihood of low-income groups.