Jun 11, 2012 10:46 AM

Competing Power Suppliers in Nasty Gridlock


(Beijing) – A crew of utility workers vented rage on behalf of their boss by cutting down high-voltage power poles during a 2007 dispute between Shaanxi Regional Electric Power Group Co. Ltd. (SPG) and its competitor State Grid Corp.

SPG never apologized for its crew's outrageous felling of State Grid transmission towers, a source told Caixin. Nor has State Grid forgiven the smaller company, which eventually won the dispute over who would sell electricity to a railroad.

Today, their lingering friction reflects deep animosity between several local power suppliers across northern China including SPG and State Grid, the region's dominant, central government-owned power distributor.

The conflict dates to a 2002 central government decision to encourage competition – and presumably lower prices for companies and consumers – in the power distribution market. That market, controlled by State Grid in the north and China Southern Power Grid in southern China, has slowly opened to new players including SPG.

A State Council directive 10 years ago called for letting "the market set prices by separating power plants and grids, and separating transmission and distribution" systems.

Soon competing against State Grid and China Southern Power Grid were new, local utility companies that could deliver electricity at prices sometimes significantly below what the major players offered.

Some of these small utilities actually found ways to outgun State Grid, despite the bigger company's influence and central government connections.

Regulators and various government agencies in Beijing as well as provincial capitals have set rules that give State Grid advantages over its competitors. But local companies have found their own support from other corners of the Chinese bureaucracy, such as city governments.

Moreover, increasing numbers of industrial enterprises seeking to save on power costs are building their own power plants and scaling back their reliance on big distributors such as State Grid.

Crossing Lines

As power supply this competition has heated up, so has the friction between State Grid and the smaller companies – sometimes to the point of violence.

On April 25, for example, a fight broke out in a section of Shaanxi Province's city of Yulin called Fugu County between SPG employees and counterparts working for State Grid's Yulin Power Supply Co. About 200 workers were involved in the fighting, which injured four State Grid employees and ended only after 70 police officers arrived.

The row was over a transmission line newly built by SPG, which State Grid called illegal.

The utility workers fought six months after State Grid officials learned of an SPG plan to bring electricity power to Shaanxi from the Jungar Banner Xuejiawan power station in Inner Mongolia after building a 220-kilovolt power line.

The competition was not welcome. So, according to a State Grid source, the bigger company drew up battle plans after finding that SPG line would cross two, existing State Grid facilities in Fugu – a 330-kilovolt transmission line and 110-kilovolt line.

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