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10 A “Modest” New Mechanism for Progressive Electricity Pricing

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Chapter Summary

In mid-2012, a progressive electricity pricing scheme for residential use was implemented nationwide to curb wasteful electricity use and achieve household energy-saving through price leverage. Under the new policy, the one-size-fits-all residential electricity rate was changed to price brackets based on the electricity consumption of each household, with the rate rising progressively as the consumption amount increases. According to the National Development and Reform Commission (NDRC), the policy planner, progressive electricity pricing was introduced to deter excessive residential consumption and incentivize energy efficiency with a price lever. It will therefore change the long-standing situation of "the more one consumes, the more subsidies one gets". Two factors contribute to the electricity pricing system: first, the overall electricity rate in China is relatively low; second, the residential electricity rate is significantly lower than industrial prices. Electricity prices in China are strictly regulated by the government.

Keywords: China; electricity pricing system; NDRC; progressive electricity pricing scheme



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