NDRC Price [2024] No. 1703
To the Development and Reform Commissions of all provinces, autonomous regions, municipalities directly under the central government, and the Xinjiang Production and Construction Corps, as well as to the National Petroleum and Natural Gas Pipeline Network Group Co., Ltd., China National Petroleum Corporation, Sinopec Group, CNOOC Ltd., and China Aviation Fuel Group Co., Ltd.:
In order to implement the spirit of the Third Plenary Session of the 20th Central Committee of the Communist Party of China and the decisions and arrangements of the Party Central Committee and the State Council on further deepening the reform of the oil and gas market system, improve the efficiency of pipeline transportation for refined oil products, and ensure a stable supply of refined oil, the relevant matters regarding the improvement of the pricing mechanism for pipeline transportation of refined oil products are hereby notified as follows.
1. Overall Approach
Based on the characteristics of pipeline transportation for refined oil products, a flexible regulatory mechanism is implemented for the cross-provincial pipeline transportation prices of the National Petroleum and Natural Gas Pipeline Network Group Co., Ltd. (hereinafter referred to as the "National Pipeline Network Group"). The National Development and Reform Commission (NDRC) will determine the maximum allowable revenue, and the National Pipeline Network Group will negotiate with users to determine the specific prices for cross-provincial pipeline transportation, provided that they do not exceed the maximum allowable revenue.
2. Main Content
(1) Method for Determining the Maximum Allowable Revenue
The maximum allowable revenue is determined by the NDRC based on the principle of "permitted cost plus reasonable return," which includes permitted costs, permitted returns, and taxes. A minimum load rate requirement is also set. When the actual load rate of the pipeline is lower than the minimum load rate requirement, the corresponding deduction will be made from the maximum allowable revenue. The permitted rate of return is determined by considering factors such as the weighted average cost of capital of the enterprise, industry development needs, and user affordability. The minimum load rate is determined based on factors such as actual load rate, fairness and openness, and the degree of substitution by other transportation modes.
The regulatory period for the maximum allowable revenue is three years. Before the start of each regulatory cycle, the excess of the annual average pipeline transportation revenue (excluding revenue generated by newly commissioned pipelines) from the previous regulatory cycle over the maximum allowable revenue will be settled and deducted when determining the maximum allowable revenue for the new cycle.
(2) Method for Determining the Price of Cross-provincial Pipeline Transportation
1. Price Determination. The National Pipeline Network Group should, without exceeding the maximum allowable revenue, consider factors such as pipeline construction and operation costs, market demand, and prices of alternative transportation modes, and negotiate fairly with users to determine the prices for cross-provincial pipeline transportation.
2. Negotiation Principles. Both the supply and demand sides should negotiate based on the principles of fully leveraging the competitive advantages of pipeline transportation and promoting an increase in pipeline load rate. For transportation modes that can be substituted, the price of pipeline transportation should not be higher than the price of the alternative transportation modes. For transportation that cannot be substituted by other modes, the price of pipeline transportation can refer to but should not exceed the railway transportation price in the region or adjacent areas. The transportation price for newly constructed pipelines shall be determined through negotiation between the supply and demand parties and shall be included in the unified management of the next regulatory cycle.
3. Price Adjustment. The National Pipeline Network Group may adjust the pipeline transportation prices in a timely manner through consultation with users based on the maximum allowable revenue approved by the NDRC, with a maximum of one adjustment per year, and ensure a proper connection with the original price level. If it is difficult to reach a consensus through negotiation when adjusting the price for the first time, the NDRC shall determine the pipeline transportation price based on the lowest price among other refined oil transportation modes that follow the same or similar route as pipeline transportation.
3. Work Requirements
(1) Prioritize Ensuring Stable Supply. The National Pipeline Network Group should strengthen communication and negotiation with refined oil production and operation enterprises, promote orderly connections between production, transportation, and sales, strictly provide pipeline transportation services in accordance with contract agreements, and ensure a stable supply of refined oil.
(2) Promote the Reduction of Transportation Costs. The National Pipeline Network Group should strengthen cost management, strictly control expenditures, optimize operation scheduling, and strive to improve pipeline load rates. Refined oil production and operation enterprises should optimize their logistics structures, arrange for more resources to be transported via pipelines, better leverage the scale effect of pipeline transportation, reduce transportation costs, and achieve win-win cooperation.
(3) Accelerate the Promotion of Fairness and Openness. The National Pipeline Network Group and refined oil production and operation enterprises should actively promote the interconnection and fair access of refined oil pipelines, and quickly realize the fair opening of refined oil pipelines to various legal and compliant operating entities, promoting the free flow and flexible allocation of resources.
(4) Ensure Proper Information Submission and Disclosure. The National Pipeline Network Group shall consult with users to determine and adjust pipeline transportation prices and report to the NDRC in a timely manner. The specific price levels shall be made public to the society on the company's official website or designated platform.
(5) Standardize Pricing Behavior. The National Pipeline Network Group shall consciously maintain market order and shall not use its market advantage to forcibly push up prices. The costs and expenses already included in pipeline transportation prices shall not be repeatedly charged under other names, and price discrimination shall not be imposed on different business entities.
This notice shall come into effect on January 1, 2025. Before the NDRC first approves the maximum allowable revenue, the transportation prices of refined oil pipelines shall be temporarily implemented in accordance with the relevant provisions of the price policy during the transition period of the reform of the oil and gas pipeline operation mechanism. Provincial price regulatory authorities may refer to the relevant provisions of this notice to manage the transportation prices of refined oil pipelines within their respective provinces.
National Development and Reform Commission
November 27, 2024
