unavoidable. To give one example, if the supervision of pricing, cost and quality was well
coordinated it would help to deliver optimal
results; but in reality pricing supervision is the
responsibility of the NDRC, cost supervision is
the responsibility of the Ministry of Finance and
NEA, and the NEA is also responsible for
supervising service quality and standards. This
division of functions runs counter to a logical
solution, which is to supervise pricing, cost and
service quality together. The current administrative silos and the non-sharing of information
undoubtedly affect the efficiency of supervision
and the effective implementation of China’s
energy policies.
(2) Consistent and effective supervision is
absent in key energy sectors, especially in
upstream and the midstream
First, consistent and effective supervision is
absent in key energy sectors. Thanks to independent, professional and consistent supervision,
the former State Electricity Regulatory Commission (SERC) achieved good results in the supervision of electricity. In other key energy sectors,
including oil, gas and coal, the decentralised,
fragmented and inconsistent supervision available does not deliver a professional service, with
knock-on effects in the various energy sectors.
Second, supervision is particularly inadequate
in some key links of the energy value chain, such
as in natural monopolies. For example, there is
no effective supervision of dominant enterprises
that might abuse their market rights in the oil, gas
and power sectors.
Third, there is a large rift between energy
regulation and environmental supervision. In the
renewable energy sector, supervision of the
resource and environmental problems caused by
renewable energy development has yet to be
introduced. And when it comes to social supervision of oil and gas exploration and development, the energy and environment supervision
authorities do not play a significant role, with the
result that action on these issues depends on the
self-discipline of oil and gas companies.
(3) An incomplete basis for supervision makes
it difficult to meet the requirements of
modern energy regulation
There are many reasons for China’s incomplete
energy regulation system. Large gaps in legislation and delays in ratifying laws and regulations
in key energy sectors make it difficult to meet
modern energy regulation requirements.
First, the absence of significant energy laws
and regulations has resulted in an incomplete
regulatory system. The most important energy
law is still awaited—the Energy Law of the PRC
was prepared at the end of 2007, but the date of its
release is still uncertain. In addition, there are no
energy regulatory laws, so there is no high-level
legal basis for defining energy regulation rights
and liabilities. In addition, laws for some key
energy sectors are missing. For example, the
long-term absence of the Oil and Gas Law of the
PRC and the Atomic Energy Law of the PRC has
left gaps in energy consumption legislation.
Second, obsolete laws and delayed amendments have failed to meet the requirements of
energy development and supervision. Based on
obsolete legislative concepts, some energy laws,
such as the Coal Industry Law of the PRC and the
Electric Power Law of the PRC, are essentially
traditional administrative regulations. Legislation
in the oil and gas sector is emergency
response-oriented, temporary and out of date.
Moreover, the amendment of some energyrelated legislation is slow. A case in point is the
amendment of the Mineral Resources Law of the
PRC, which, due to theoretical disagreements and
the involvement of other non-energy sectors, has
still not been finalised after years of discussions.
Third, the absence of essential implementation
and support regulations leads to poor operability.
For example, oil and gas legislation, such as the
Coal Industry Law of the PRC, suffers from
unclear regulatory boundaries, unclear definition
of rights and liabilities, and uncertainty regarding
its scope and conditions. The lack of implementation and support regulations results in
legislation that is ineffective and unsuited to
practical implementation.
Special Report 4: China’s Energy System Revolution
445
coordinated it would help to deliver optimal
results; but in reality pricing supervision is the
responsibility of the NDRC, cost supervision is
the responsibility of the Ministry of Finance and
NEA, and the NEA is also responsible for
supervising service quality and standards. This
division of functions runs counter to a logical
solution, which is to supervise pricing, cost and
service quality together. The current administrative silos and the non-sharing of information
undoubtedly affect the efficiency of supervision
and the effective implementation of China’s
energy policies.
(2) Consistent and effective supervision is
absent in key energy sectors, especially in
upstream and the midstream
First, consistent and effective supervision is
absent in key energy sectors. Thanks to independent, professional and consistent supervision,
the former State Electricity Regulatory Commission (SERC) achieved good results in the supervision of electricity. In other key energy sectors,
including oil, gas and coal, the decentralised,
fragmented and inconsistent supervision available does not deliver a professional service, with
knock-on effects in the various energy sectors.
Second, supervision is particularly inadequate
in some key links of the energy value chain, such
as in natural monopolies. For example, there is
no effective supervision of dominant enterprises
that might abuse their market rights in the oil, gas
and power sectors.
Third, there is a large rift between energy
regulation and environmental supervision. In the
renewable energy sector, supervision of the
resource and environmental problems caused by
renewable energy development has yet to be
introduced. And when it comes to social supervision of oil and gas exploration and development, the energy and environment supervision
authorities do not play a significant role, with the
result that action on these issues depends on the
self-discipline of oil and gas companies.
(3) An incomplete basis for supervision makes
it difficult to meet the requirements of
modern energy regulation
There are many reasons for China’s incomplete
energy regulation system. Large gaps in legislation and delays in ratifying laws and regulations
in key energy sectors make it difficult to meet
modern energy regulation requirements.
First, the absence of significant energy laws
and regulations has resulted in an incomplete
regulatory system. The most important energy
law is still awaited—the Energy Law of the PRC
was prepared at the end of 2007, but the date of its
release is still uncertain. In addition, there are no
energy regulatory laws, so there is no high-level
legal basis for defining energy regulation rights
and liabilities. In addition, laws for some key
energy sectors are missing. For example, the
long-term absence of the Oil and Gas Law of the
PRC and the Atomic Energy Law of the PRC has
left gaps in energy consumption legislation.
Second, obsolete laws and delayed amendments have failed to meet the requirements of
energy development and supervision. Based on
obsolete legislative concepts, some energy laws,
such as the Coal Industry Law of the PRC and the
Electric Power Law of the PRC, are essentially
traditional administrative regulations. Legislation
in the oil and gas sector is emergency
response-oriented, temporary and out of date.
Moreover, the amendment of some energyrelated legislation is slow. A case in point is the
amendment of the Mineral Resources Law of the
PRC, which, due to theoretical disagreements and
the involvement of other non-energy sectors, has
still not been finalised after years of discussions.
Third, the absence of essential implementation
and support regulations leads to poor operability.
For example, oil and gas legislation, such as the
Coal Industry Law of the PRC, suffers from
unclear regulatory boundaries, unclear definition
of rights and liabilities, and uncertainty regarding
its scope and conditions. The lack of implementation and support regulations results in
legislation that is ineffective and unsuited to
practical implementation.
Special Report 4: China’s Energy System Revolution
445