Pricing of electricity in China

In China, the State Power Corporation (SPC) was the dominant producer and supplier of electric power. Our price estimation results based on published data of the SPC indicate that short run cost factors, like fuel costs and investment expenditure, were more important in the price determination process. Although the power purchase prices paid by the SPC to independent power producers (IPPs) have already covered capital costs, capital costs of generation and transmission assets owned by the SPC were ignored in the process. Our studies indicate that electricity prices in China were highly subsidized and below the average total costs of generation and transmission.