At present, China's power system reforms have largely stalled, leading to widespread public doubt and confusion. Within the industry, state-owned power enterprises are encountering significant barriers to reform. The question now is not just how to push forward with these reforms, but also how to overcome external obstacles that hinder their development. This has become a shared challenge among power state-owned enterprises.
One of the biggest hurdles to reform lies within the structure of the industry itself. Reforming state-owned power companies is a complex process, not driven by simple measures alone. In a recent interview, industry insiders emphasized that the most critical issue in this reform is the adjustment of electricity pricing mechanisms.
The electricity price reform problem stems from the institutional conflict between market-driven coal prices and planned electricity prices, often referred to as the "coal-electricity" contradiction. Coal prices fluctuate based on market supply and demand, while electricity prices remain regulated, creating a mismatch. In recent years, rising coal prices have caused severe financial strain on power companies, resulting in widespread policy-related losses.
Currently, the debt ratio of the top five power companies remains high, hovering around 85%. During an interview with reporters, Chen Feihu, General Manager of Guodian Group, stated that a debt ratio of 75% is acceptable, but the overall debt levels of central power enterprises are clearly too high. According to Li Junsheng, Deputy Director of the State Power New Energy Research Institute, there are two main reasons for this high debt: first, high coal prices combined with low electricity prices cause some companies to lose money and rely on borrowing; second, many companies invest in projects without achieving economies of scale, making it difficult to become strong.
An unusual phenomenon in state-owned power enterprises is that even if a company is losing money and its debt ratio exceeds 100%, it still cannot stop production. For example, a thermal power plant under a central power enterprise has a debt ratio over 120%. Theoretically, the more a company loses, the worse its situation becomes.
Li Junsheng believes that both internal and external forces are needed to drive reform. Externally, deepening the power sector reform, especially electricity price reform, is essential. Injecting new energy and resources into state-owned enterprises from outside can help. Internally, power companies must be encouraged to develop their own strengths and innovation. Only through a combination of these efforts can meaningful progress be made.
Currently, the core of state-owned enterprise reform led by relevant departments is to establish a modern corporate governance structure, including boards of directors, personnel systems, and investment and financing reforms. However, Li Junsheng pointed out that these are not the biggest issues facing power enterprises today. Instead, the key challenges lie in institutional barriers and strategic planning.
He noted that many power companies lack long-term, practical strategies. There is a lot of formalism and short-term thinking, which creates a sense of ignorance among employees. Company managers often focus more on economic indicators and image projects rather than on strategic positioning and sustainable development. This mindset also leads to various problems, highlighting the need for a comprehensive shift in thinking.
Despite past efforts, the debate over how to deepen the reform continues. The previous round of power sector reform began 11 years ago, with the 2002 State Council document outlining goals such as breaking monopolies, introducing competition, improving efficiency, reducing costs, and establishing a more open and orderly electricity market. However, in recent years, the pace of reform has slowed, and many believe that effective mechanisms for incentives, restraint, and sustainable development have yet to take shape.
While some see progress in increased capacity and grid construction, others argue that institutional barriers like monopoly practices and chaotic market order persist. Administrative controls and price regulations still dominate, and the separation of transmission and distribution remains unresolved. Some industry experts suggest that power dispatch should be separated from grid companies, arguing that without this, grid companies may control all users.
In response, Liu Xin, head of the State Grid Power System, said that official documents have not been lost or divided. He argued that separating transmission and distribution would be like removing nerves from the body, calling it unrealistic. He criticized the current environment, where discussions about reform are often informal and not based on official channels. He believes that there is no consensus on the next steps for reform, with different groups offering varied opinions without a clear direction.
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