Electricity pricing reform should consider it as a public product

The official website of the central government has published the National Development and Reform Commission’s answer to a netizen’s suggestion on improving the tiered electricity pricing system so as to encourage residents to use more clean energy.

The NDRC responded saying that the domestic electricity price for residential use is too low and that for commercial use is too high, and that it is going to reform the electricity pricing system so that it more faithfully reflects its cost as a commercial product.

The problem of the price of electricity for residents being too low has existed for a long time. In November 2009, the official in charge of the NDRC told the media that the residential electricity price was too low and a tiered pricing system would be introduced. In 2012 that system was introduced, according to which the electricity price is higher above a designated amount used.

Now the NDRC has been looking at the problem again.

One key reason for the low residential electricity price is commercial electricity users subsidize the electricity consumption of residents, as they pay a much higher electricity price than residential users because they are considered to be making a profit from its use.

Some experts believe this has increased the burden on enterprises, affected their economic competitiveness and prevented the rational distribution of the electricity resources.

However, such subsidizing exists in many developing countries because it helps to lower residents’ living costs and so helps stimulate consumption. Electricity is a necessity for daily life and its low price has played a crucial role in prompting people’s daily consumption. The popularizing of electric appliances and electronics is partly a result of it, while the ongoing shift from fossil fuels such as coal to electricity will hopefully be accelerated by it.

Admittedly, enterprises face a heavier burden because of the subsidies to residents, but don’t forget residents are the ultimate payers for the bills as enterprises can always pass on the cost to consumers by increasing the prices of their products or services.

Of course, a reform of the electricity pricing system is necessary, so as to lower the burden for enterprises and encourage residents to save energy. But electricity is a public product and it must be priced so it benefits all.