Beijing’s pipeline tariff plan threatens profits

摘要

The Chinese government has unveiled proposals to reform the tariff structure for the country’s gas pipelines. This will increase corporate transparency, lower costs to boost gas demand, and pave the way for third-party access. But it risks hammering the profitability of state-controlled energy firms’ pipeline management. China’s main economic planning agency, the NDRC, has issued draft guidelines for reform of the pipeline tariff system. It does not yet have an implementation date. Under the current system, state-run firms propose a tariff to the NDRC based on the investment they have made in the pipeline, depreciation rates and their targeted profit margin. This has led to wide variations in transmission tariffs between pipelines, and the suspicion in government that operators overstate their costs in order to secure a higher tariff. The government is opposed to opening up pipelines to third-party access-a goal of its current five-year plan-until it is able to establish tariffs in a transparent manner.