Institution, Growth Mechanism And Reserch On Competition Policy Of Electricity Industry

According to the ISCP analytical framework, this dissertation starts from the analysis on institution and growth mechanism. After clarifing the operation system of electricity industry, we establish a regulation theory and model of present electricity market in China. On the basis of existing theories and the present situation of domestic electricity market, we advise the reformation path and the framework of competition policy of electricity industry in China. It maily contains the following sections, which also includes the main innovations of this dissertation.First of all, based on the related literature review and definition of concept, this thesis bring up the basic mode of political and economic system as well as its internal logic from a multidisciplinary perspective including history, politics, sociology and economics. Then we expain the property rights incetntives and constrains that local governments face and their competition strategies. On one hand, promation incentives, fiscal incentives and rent incentives give local government residual rights of control. Administrative decentralization and economic decentralization grant local governments authority of ownership, allocation and decision in fact. All those rights make up actual "local property rights". On the other hand, highly centralized rights of personnel appointment and removal, logic of official promotion and performance evaluation index regulate local governments'best way of excercising those rights. In order to win in this fierce competition, they look for newer and better methods and push reformation and economics forward in full stride. This is the elementary institutional characteristics during transition in China. The institution, to great extent, contains the logic of market competition. It is a ecological imitation of real market economy. So we name this institutional charaticteristic as Imitation of Market Competiton among Local Governments.On this basis, our thesis for the first time establishes a simple mathematical model to analyze the growth mechanism of China. We find that it must satisfy three conditions:institutional soft constraints, government centralization and export-oriented development mode on order to realize economic growth. Institutional soft constraints are property rights incentives, government centralization is property rights constraints, and export-oriented development mode provides adequate market demand. In the meanwhile, it is the first time that the relationship between market segmentation and economic development is clarified from the theoretical and empirical perspectives. Economic growth combined with market segmentation is reasonably explained. What's more, China now may on her way to "segmented quasi-market". Although the competition can effectively accelerate rapid economic growth, it is different from real market economy in essece, which leads to many problems along with growth and would finally affect sustainable development of China's economy. As a result, China's growth mode needs urgent change.In terms of basic institutional environment and economic growth mechanism, we continue discussing the operation system of electricity industry in China. Local governments'role, especially the province governments'role, in the regulation of electricity market is emphasized. The effect of basic institution and growth mechanism on the operation and reformation of the electricity industry is analyzed in detail. Then on the basis of the analysis on the operation system, we build a regulation theory and model of the electricity market in China. And a new concept "two-win exchange regulation failure" is raised, based on which do we give the method of measuring the market power of the Grid in China. What's more, the repeatedly "shortage-surplus" of supply of electricity, regional protection and market segmentation as well as the distortion of industrial structure and acess discrimination are explored at the same time. In this thesis, we believe that local governments grasp the real regulation power after regulation decentralization. They practise price and acess regulation power within the boundary the central government can accept. Meanwhile, the central government maily depends on the right of personnel appointment and removal to control local governments'rights of discretion. Taking the importance of economic growth in the performance evaluation into account, local governments'main purpose of electricity-market regulation is to accelerate economic growth. On the effect of basic institution and growth mechanism, local governments achieve this goal by virtue of lowering electricity price. In the meantime, fiscal soft constraints results in protection and inefficiency in the power generation side, which causes lag of power grid construction and failure of the reformation of departure between power generation and grid with the aim of bidding competitively to link with the grid. This is the basic framework of electricity market regulation in China. However, it must be guaranteed that the power transmission side earns reasonable profit. What'worse, the high information cost resulting from imperfect supervision make the power grid side be able to charge prices and fees arbitrarily, which makes up market power of the grid company. In order to compensating the production loss, local governments ask the power grid company to further lower the electricity price of the large users of electricity and implement almost perfectly supervision. As compensation to the grid company, local governments appropriately increase the electricity price of small users and turn a blind eye to the pratice of market power of the grid company. We name this process as "two-win exchange regulation failure", which is caused under the background of the present situation of regulation environment and obviously different from "the capture regulation failure". This is the regulation theory raised in our thesis.Base on the analysis above, we think that the past reformation practice maybe too radical. The pratice tries to rapidly and completely construct an electricity market similar to foreign western coutries. But it ignores the incentive compatibility between the pratice and the present regulation environment, which probably leads to setback and even failure during reformation. As a substitution, a graduate and compatible reformation path seems more practical and improves the operation efficiency of electricity market. This path needs finding the main problems exsiting in the electricity market first. Then from the perspective of solving the problems (instead of striding across) do we use the experience and measures taken in foreign countries for reference. This path'goal is to perfect the existing operation system instead of rebiding it first, which undountedly reduces the resistance of reformation and improves the operation efficiency simultaneously. To some extent, a reformation path like this seems more practical nowadays. What's more, the theory raised in our thesis makes a theoretical and logic foundation for further analysis.According to this theory, local governments as the regulators have the incentive to lower the electricity price the users face, and they are hard to capture. What's more, it adapts to the basic institutional environment. These are the advantages of the existing operation system. However, it still has two fundunmental problems. First, it is inefficient on the power generation side and leads to soft cost constraint. On one hand, this reduces the profit of the grid company. On the other hand, this is harmful to the competition justice. Second, the monopoly of the power transmission side results in the abuse of market power of the grid company. On one hand, this causes damage to many final users. On the other hand, this brings about industrial distortion and aggravates the difficult of growth mode transition. The past reformation tries to solve the two problems by virtue of deprating the generation and transimission side as well as separating the transmission and the distribution side and establishing a new regulation agency-the electricity regulation commision. But it is proved that the effect of some of those measures is unobvious and some even can't be implemented, which roots in that those measures don't take the advantages of the existing operation system into account.Next, we make a systematic review on related literature from the perspective of the power generation side, power transimission side and government regulation side according to the present market structure of electricity in China. The review mainly contains the competition policy, the operation mode, the reformation practice and the present situation of the electricity market as well as the dilemmas that the reformation of electricity market faces. Those dilemmas includes:the shortage of electricity supply and the dilemma that electricity pricing faces; the basic institutional environment and the dilemma that separation of the power generation side and transmission side faces; government competition and the dilemma that the national united electricity market faces; the basic institutional environment and the dilemma that the lag of power grid consruction faces; growth mode and the dilemma that the final price formation faces; the dilemma that it is unsuitable to learn from the reformation experience of foreign countries for China's existing electricity operation system; the basic institutional environment and the dilemma that independent regulation agency faces; the growth mechanism and the dilemma that regulation power distribution faces; the existing electricity operation system and the dilemma that regulation reconstruction faces, etc. All those dilemmas reflect the critical effect of the basic institutional environment and growth mechanism on the reformation of the electricity market in China.Finally, on the basis of the analysis mentioned above, we advise that the key point of the competition policy should be sales competition of electicity with the combination of the transimission and distribution side. On one hand, the realization of sales competition can profit many users, especially the small users. On the other hand, it can restore the electricity price that large users face and such restoration can change the operation system fundamentally as well as accelerate the transition of China's growth mechanism, which will finally break the effect of growth mode on the reformation of electricity industry. Along with this reformation path, China's electricity industry will come into competitive structure on the generation and sales side while the transmission side will still maintain monopoly. In order to ensure the normal operation of this market structure, we should also decentralize the regulation power. That is the electricity regulation commission takes responsibility for the foster and maintaince of the competitive sides and local governments are reposonsible for the regulation and supervision of the monopoly side. On one hand, such regulation decentralization can provide carriers for the realization of the rights of electricity rtegualtion commission. On the other hand, it can make use of local governments'goal of pursuing economic growth, which stimulates local governments into lowering the grid company's rent as well as the electricity price. This can avoid capture regulation failure and meanwhile eliminate the root of two-win exchange regulation failure. What's more, it can also make local governments develop actively the grid net and the exchange of electricity among regional markets, which can greatly help the formation of the national united electricity market. In one word, the reformation path we put forward in this dissertation is "combine the transmission and distribution sides, make sales of electricity competitive, realize effective aceess between transimission and sales, and accelerate the transition of economic mechanism". And the competition policy framework is "foster competiton of generation and sales side, regulate the operation of the middle monopoly, decentralize the power of regulation and form an effective market of electricity ".