Exclusive: China mulls new energy "super ministry"

BEIJING (Reuters) - China is considering a proposal to create an energy "super-ministry" as part of a sweeping cabinet reshuffle in 2013, two independent sources said, a step that would help Beijing impose its will on an industry beset by bureaucratic infighting.

The new ministry would replace the National Energy Administration (NEA), China's main energy regulator, and would take on the energy-related duties currently scattered across other government bodies, said the sources, who requested anonymity due to political sensitivities.

The super ministry would also handle long-term planning and policy making for the sector.

"Various interest groups are now wrestling (over the plan), but there is a need for an energy super-ministry," a source with ties to China's top leadership told Reuters.

China, the world's biggest energy consumer, has been trying to draw up a long-term strategy for the sector that will address the security of overseas oil-and-gas supplies, rationalize pricing and taxation policies, boost new energy like nuclear and renewables and cut pollution and greenhouse gas. Ministries in China also often overlap as regulator.

Without a unified energy regulator, Beijing has struggled to achieve many of its priorities, including establishing a strategic petroleum reserve and reining in its perilous and chaotic coal industry.

Among other changes, the proposal -- being considered by the State Council, China's cabinet -- calls for giving the new ministry the power to set oil, gas, coal and electricity prices. Today, that work is handled by the powerful National Development and Reform Commission (NDRC), China's state planner.

It is not clear if the move would abolish the National Energy Commission, a supervising body set up at the same time as the NEA and chaired by Premier Wen Jiabao.

The NDRC and the NEA declined immediate comment when reached by telephone.

A veteran official with the state-owned China National Petroleum Corp (CNPC) said the creation of an energy super-ministry was on the cards and that it would focus on policy rather than on detailed regulation.

"It will not be a specialized ministry like the (now-defunct) Ministry of Coal Industry that micromanaged specific sectors," the official said, asking not to be identified.

"It will be a policy setter and provider of services."

REDUCING OVERLAPS

Experts cautioned that creating the new ministry would mean overcoming many of the old obstacles that have long stood in the way of better regulation.

"They have been talking about it for years but this isn't something that can happen very quickly," said Lin Boqiang, a member of the consulting committee of the NEA and director of the China Centre for Energy Economics at Xiamen University in southeast China.

The biggest stumbling block will be the NDRC, already a huge and powerful super ministry with considerable powers over the energy sector, Lin added.

"The problem is still how to transfer some of the most important roles in the sector now held by others," he said.

China formed its first energy ministry in 1988 from the remnants of the old electricity, coal and oil bureaus, but dissolved it in 1993 after the regulator failed to control the powerful state-owned enterprises that dominate the sector.

Its duties were eventually swallowed up by at least 13 other ministries and bureaus, including the State Development and Planning Commission, the predecessor of the NDRC.

Policy overlaps and conflicts of interest are common.

For example, in the face of a stand-off over prices between the power and coal sectors, Beijing found itself powerless to prevent the blackout that struck south China in early 2008, triggered by freezing blizzards.

There is also confusion about the status of powerful state-owned firms like CNPC and the State Grid Corp, which participates in the policy-making process.

The State Electricity Regulatory Commission, China's power watchdog, is regarded as subservient to the State Grid, a state-owned enterprise that the commission is supposed to oversee. The watchdog's offices are even located in the grid firm's main compound.

"China's state energy firms, CNPC in particular, still believe they are like an oil ministry, as they have the most expertise and thus authority," said a government official speaking on condition of anonymity.

"It's very hard for the Ministry of Land and Resources or the NEA to manage them."

China set up the NEA in 2008 to improve coordination in the sector and conduct sector planning, but it has no policymaking powers of its own and its decisions remain subject to the NDRC's approval.

(Additional reporting by Chen Aizhu; Editing by Don Durfee and Neil Fullick)

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