The National Development and Reform Commission ("NDRC") has recently distributed the Circular on Reducing the Power Price for the General Industry and Commerce to the Equivalent Extent of the Adjustment to the Value-added Tax Rate for the Power Industry (the "Circular"), with effect from May 1, 2018.
The Circular clearly specifies that, after the value-added tax (VAT) rate applicable to the power industry has been adjusted from 17 percent to 16 percent, the reduction in the tax-inclusive transmission and distribution prices of provincial power grid enterprises and in the criteria of governmental funds as well as the surcharges, and the lump-sum refund of period-end uncredited VAT, will be all used for cuts in the power price for the general industry and commerce. Moreover, the Circular requires that competent price authorities of all provinces (autonomous regions and municipalities directly under the Central Government) shall lose no time in working out the detailed plan with respect to the reduction in the power price for the general industry and commerce to the equivalent extent of the adjustment made to the VAT rate, and that such plan shall not be implemented until it has been approved by the people's government at the same level and filed for record with the NDRC. The level of power transmission and distribution prices for the general industry and commerce in each province (autonomous region or municipality directly under the Central Government) shall be lowered correspondingly as well. Furthermore, the Circular notes that power grid enterprises shall fully cooperate with competent price authorities and collect the charges of electricity consumed by users in May and thereafter at the reduced rate.