Shanghai is China’s financial and business hub. In late July 2004, with daytime temperatures reaching 37 degrees Celsius, the city’s electricity consumption surged to a weekly record of 14.35 million kilowatt hours. The city authorities resorted to asking 2,100 businesses to operate at night, and a further 3,000 others to adjust operating hours.
Even high-profile multinational companies were not spared. General
Motors and Volkswagen were ordered to suspend production for more than a week each. Shanghai Volkswagen spokesman Lu Jun explained, “It's a rule. We have to cut power for 10 days … We’ve cut power and so have had to stop production. It's all over Shanghai”.1
The Shanghai episode …show more content…
President Zhou Dongzhou predicted that exports of thermal coal would fall to 70 million tons.3
August 2004, I.P.L. Png.
“Shanghai power crunch hits Volkswagen, others”, Reuters, 23 July 2004.
“Chinese premier stresses transport of coal, oil, fertilizer, grain”, Peoples Daily Online, English
Edition, 30 July 2004.
“Japanese utilities to pay more for coal”, Shanghai Daily, 19 April 2004.
Since the 1960s, the Chinese government has regulated the supply of thermal coal to electric power plants. It requires coal mines to supply power plants with about one-quarter of coal purchases at a contract price.
The government regulates the supply of coal to support its regulation of the electricity industry. In the late 1990s, the Chinese government dissolved the
Ministry of Electric Power, and divided its functions between the State Electricity
Regulatory Commission (SERC) and the State Power Corporation of China. 4
The State Power Corporation owns five of the six transmission grids
(Northwest, North, Northeast, Central, and East) and about half of the national generating capacity. Regulation is necessary to ensure that the State Power
Corporation does not abuse its monopoly power.
The SERC regulates all aspects of the electricity industry, except pricing.
With regard to electricity pricing, the SERC’s role is to advise the National
Development Reform Commission (NDRC).
To ensure that electric