Investment Rating - The report maintains an "Overweight" rating for the public utility industry, expecting the industry index to outperform the market index by more than 10% in the next six months [46]. Core Insights - The public utility index increased by 0.7% in the last two weeks, underperforming the CSI 300 index by 1.7 percentage points, ranking 26th among 31 industries [5][12]. - Year-to-date, the public utility index has decreased by 1.2%, lagging behind the CSI 300 index by 7.3 percentage points, ranking 28th among 31 industries [5][12]. - In the last two weeks, five sub-sectors of the public utility index saw gains, with the heating service sector up 6.7%, gas sector up 5.3%, and electric comprehensive service sector up 3.5% [14]. - The report highlights significant developments in the industry, including the formal launch of the Zhejiang electricity spot market and new pricing mechanisms for renewable energy in Shandong and Gansu provinces [5][41]. Summary by Sections 1. Market Review - As of August 14, the public utility index has shown mixed performance, with 78 out of 131 listed companies experiencing stock price increases, while 52 companies saw declines [16][17]. - The report notes that the average price of thermal coal has decreased year-on-year, suggesting a focus on companies like Huadian International and Guodian Power [5][41]. 2. Industry Valuation - The public utility sector's price-to-earnings (P/E) ratio is currently at 18.6 times, with the solar power sector having a notably high P/E ratio of 589.1 times [19][20]. - The heating service sector's P/E ratio stands at 38.2 times, while the gas sector is at 20.0 times [19][20]. 3. Industry Data Tracking - The average price of thermal coal at the Shaanxi Yulin pit was 626 RMB per ton, up 6.7% from the previous value, while the Qinhuangdao port's average price was 675 RMB per ton, up 5.0% [30][33]. 4. Key Industry News - The report discusses various announcements from key companies, including performance compensation adjustments and dividend planning for the next five years [39]. - It also highlights the establishment of a market-driven pricing mechanism for renewable energy in Gansu province [43]. 5. Industry Weekly Perspective - The report indicates that in July, the industrial power generation reached 926.7 billion kWh, marking a year-on-year growth of 3.1% [41][43].

当此时，浙江电力现货市场转正式运行，释放了现货市场提速建设的重要信号。 8月7日, 浙江电力现货市场历经463天长周期结算试运行后转为正式运行，这也是长三角 地区首个转正的现货市场，标志着浙江在深化电力体制改革、推动构建全国统一电力市场上 迈出关键一步。 新一轮电力体制改革以来，全国统一电力市场建设取得重要阶段性进展，"统一市场、 两级运作"市场架构经历长周期、多场景的实践检验。从目前来看，市场发展态势良好，中 长期、现货、辅助服务协同运作的电力市场体系初步形成，市场在资源配置中的决定性作用 日益凸显。 在此背景之下，国家进一步加快全国统一电力市场建设。现货市场方面，今年4月，国 家发展和改革委、国家能源局发布通知，明确年底前基本实现电力现货市场全覆盖，全面开 展连续结算运行，最晚于2026年6月底前完成。 于浙江而言，现货市场转正也是在资源约束和能源转型双重压力下，面向市场寻求解决 方案的重要探索，旨在借助市场的资源基础配置作用，引导资源顺畅流动，增强电力供给能 力，助力新能源消纳，确保电力保供的根"立"得稳、能源转型的局"破"得开。 浙江电力现货市场建设历程可追溯至2019年启动的试运行，期间因保供稳价等 ...

Core Viewpoint - The introduction of the "Basic Rules for Electricity Market Measurement and Settlement" marks a significant step towards establishing a unified national electricity market in China, aiming to standardize and enhance the transparency of measurement and settlement processes [3][5]. Summary by Sections Background and Significance - The need for reform in the electricity market's measurement and settlement processes has become critical due to existing issues such as inconsistent rules across provinces, lack of data transparency, and varying settlement cycles, which hinder efficient resource allocation [6]. - The issuance of the rules aligns with national policies aimed at breaking local protectionism and promoting efficient resource flow, thus providing a necessary institutional guarantee for market transactions [6]. Key Components of the Rules - The rules cover measurement management, settlement management, and supervision management, defining the scope of measurement and settlement to include all types of electricity market transactions, including virtual power plants and new energy storage [4]. - The settlement process is divided into three stages: preparation, basis compilation, and electricity fee settlement, with an emphasis on transparency and the prohibition of "imbalance funds" [4]. Importance of the Rules - The rules establish a standardized framework that reduces cross-provincial transaction costs and enhances market efficiency by promoting a "daily clearing and monthly settlement" model in regions with continuous spot market operations [11]. - By ensuring transparency in settlement processes and reinforcing risk prevention measures, the rules protect the legitimate rights and interests of market participants, thereby increasing market confidence and attracting more investment [12]. Digital Transformation and New Energy System Support - The rules support the digital transformation of the electricity market by requiring the establishment of a unified data platform for automatic data collection and interaction, paving the way for future applications of technologies like blockchain and smart contracts [13]. - By including new entities such as virtual power plants and new energy storage in the settlement system, the rules facilitate their participation in auxiliary services and capacity markets, thus supporting the construction of a new energy system [14]. Challenges Ahead - Despite the establishment of a unified framework, challenges remain, particularly regarding the insufficient data infrastructure needed to support the high-frequency settlement required by the rules [16]. - Issues such as inadequate coverage of distributed energy measurement devices, insufficient data collection frequency, and delays in data transmission networks need to be addressed to fully realize the potential of the new rules [16].

Core Viewpoint - The introduction of the "Basic Rules for Electricity Market Measurement and Settlement" serves as a crucial institutional guarantee for the construction of a unified national electricity market, filling the last gap in the "1+6" foundational rule system [3][4]. Group 1: Institutional Foundation - The new rules aim to address the final bottleneck in the nationwide circulation of electricity, aligning with the national goal of establishing a high-efficiency and fair competitive unified market by 2025 [4]. - The "1+6" foundational rule system, which includes the new measurement and settlement rules, is designed to standardize the entire process from transaction declaration to settlement, resolving long-standing inconsistencies in measurement and settlement standards [4][5]. Group 2: Fair and Efficient Market Operation - The rules establish a unified settlement cycle based on natural months, providing a framework for accurate electricity cost management for market participants [6]. - A comprehensive standardization of the settlement preparation phase is mandated, requiring a unified data exchange platform to facilitate efficient data flow across all segments of the electricity market [6][7]. Group 3: Impact and Future Outlook - The implementation of the rules is expected to enhance the quality and efficiency of electricity market measurement and settlement, breaking down regional barriers and promoting resource circulation [9]. - The rules will significantly lower transaction costs and improve transaction efficiency, facilitating a more integrated and competitive electricity market [9][10]. - The introduction of these rules marks a milestone in the reform of the electricity system, laying a solid foundation for a transparent, efficient, and unified electricity market that supports energy transition and high-quality economic development [10].

Core Viewpoint - The issuance of the "Basic Rules for Metering and Settlement in the Electricity Market" aims to unify and standardize the metering and settlement processes across the national electricity market, addressing existing inconsistencies and inefficiencies in the system [3][4]. Group 1: Background and Purpose - The rules are a continuation and enhancement of previous regulatory documents since the 2015 electricity system reform, aiming to establish a unified national electricity market [3][4]. - The need for these rules arose from various issues such as inconsistent metering management, unclear responsibilities among market participants, and delays in electricity settlement [3][4]. Group 2: Main Content of the Rules - The rules consist of 6 chapters and 56 articles, covering general provisions, overall requirements, metering management, settlement management, supervision management, and supplementary provisions [5]. - Key areas include defining rights and obligations of market participants, managing metering devices and data, and establishing clear settlement processes and timelines [5]. Group 3: Requirements for Unified Metering and Settlement - Emphasis on independent metering conditions and regular calibration of metering devices, with clear responsibilities for costs [6]. - Standardization of settlement processes, including rights and obligations of various market participants, and unification of measurement units and settlement cycles [6][7]. - Introduction of risk management measures for settlements, including the requirement for market participants to provide guarantees [6]. Group 4: Responsibilities in Market Settlement - Clear division of responsibilities between electricity trading institutions and grid companies in the settlement process, with trading institutions responsible for compiling settlement data and grid companies for providing metering data and issuing bills [8]. - The rules clarify the responsibilities of grid companies in verifying settlement data and outline the verification process [8]. Group 5: Settlement Timing Regulations - The rules standardize the timing of settlement processes, which previously varied by region, ensuring timely issuance of settlement data and bills [9]. - Specific timelines are established for the issuance and confirmation of settlement data, with provisions for dispute resolution [9].

Core Insights - The national electricity load in China has reached a historical high, surpassing 1.5 billion kilowatts for the first time, indicating a significant increase in electricity demand due to high temperatures this summer [1][2] - Multiple provinces have reported record-breaking electricity loads, with Sichuan, Shaanxi, and Zhejiang among those experiencing substantial increases [2][3] - The National Energy Administration is implementing measures to ensure electricity supply during peak demand periods, with a focus on coal inventory and inter-provincial electricity trading [7][9] Electricity Demand and Supply - As of July 16, 2023, the national maximum electricity load reached 1.506 billion kilowatts, an increase of 0.55 million kilowatts compared to the previous year [1] - The summer of 2023 has seen multiple records broken for electricity load, with 36 instances of historical highs reported across various provincial grids [2] - The National Energy Administration has noted that coal inventories at regulated power plants remain above 200 million tons, ensuring over 30 days of supply [7] Market Performance - The electricity sector index has risen by 2.22% this year, with significant net inflows into electricity stocks, totaling 2.444 billion yuan over the last 10 trading days [4] - Companies like Huayin Electric have seen stock price increases of over 80% in July, reflecting strong market interest [4][5] - The performance of electricity companies is bolstered by lower coal prices, which have reduced operational costs and improved profit margins [5][6] Policy and Regulatory Environment - The National Development and Reform Commission and the National Energy Administration are working on a mechanism for regular inter-grid electricity trading to enhance supply stability during peak periods [9] - The ongoing electricity market reforms are expected to reshape the profitability of thermal power generation, with a focus on integrating renewable energy sources [6][9] - The establishment of a unified national electricity market is anticipated to improve resource allocation and resilience of the electricity grid [7][9]

Investment Rating - The industry investment rating is "Positive" [1] Core Insights - The new capacity pricing policy in Gansu Province significantly raises the coal power capacity price standard to 330 CNY/kW·year, exceeding market expectations and providing a two-year implementation period [3][4] - The policy expands the coverage of capacity pricing to include various power generation types such as energy storage, hydropower, wind, and solar, with different capacity coefficients based on their contributions to grid capacity [4][6] - Gansu's capacity pricing reform is expected to lead the direction of electricity market reform in China, with the potential for a nationwide adjustment in capacity pricing, benefiting coal power companies [5][7] Summary by Sections Section 1: Policy Highlights - The Gansu capacity pricing policy introduces a significant increase in the coal power capacity price standard, with a planned increase to no less than 165 CNY/kW·year by 2026 [3] - The policy creatively includes various power generation types in the compensation scope, determining capacity fees based on their effective capacity contributions [4] Section 2: Market Impact - The new policy is seen as a major breakthrough, potentially accelerating the transformation of coal power functions amid the rapid growth of renewable energy installations during the "14th Five-Year Plan" [5] - The market-oriented approach to capacity pricing is expected to yield higher compensation levels by 2026, reflecting actual supply and demand dynamics [6] Section 3: Investment Recommendations - Gansu is positioned as a leader in national electricity market reform, with the potential for value reassessment of coal power companies due to the unexpected increase in capacity pricing [7] - Key beneficiaries include Gansu Energy and Huaneng International, with other coal power companies encouraged to follow Gansu's model [7]

Core Viewpoint - The launch of a national unified electricity market in China is set to support the "dual carbon" goals and efficient energy allocation, indicating a profound transformation in the electricity system, accompanied by new challenges [1] Group 1: Challenges and Risks - The transition to a national electricity market may lead to resource siphoning from underdeveloped regions to developed ones, raising concerns about market efficiency and regional equity [1] - New market participants face uncertainty in market signals, particularly as renewable energy projects move away from guaranteed planning electricity, making investment decisions precarious [1] Group 2: Strategies for Adaptation - Participants need to enhance market adaptability and manage price volatility, with examples including adjusting production schedules to low-price periods and optimizing costs through time-based electricity pricing [1] - Companies must shift from passive acceptance to strategic participation in the market [1] Group 3: Institutional Framework - Activating diverse stakeholders and strengthening transparent regulation are crucial for breaking the zero-sum game, requiring more users to enter the spot market and ensuring fair and transparent rule mechanisms [2] - The transformation challenges not only technology but also the wisdom of institutional design and the strategies of various participants [2] - There is a need for further linkage between renewable energy development models and electricity market prices, with all players, including renewable energy companies, contributing to the overall reduction of electricity costs [2]

Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the **public utility industry**, particularly the **thermal power sector** and its dynamics in the context of coal prices and electricity pricing strategies [1][2][3]. Core Insights and Arguments - **Coal Price Impact**: A significant drop in coal prices has not led to a notable increase in thermal power valuations, as the market is primarily pricing based on future profit recovery [1][2]. - **Electricity Pricing Reform**: Starting in 2026, the recovery of fixed costs in coal-fired capacity pricing will be no less than 50%, which is expected to reduce the cyclicality of thermal power [1][3]. - **Dividend Attractiveness**: Leading companies like Huaneng International have attractive dividend yields, exceeding 6.5%, which is appealing to investors [1][3]. - **Investment Environment**: The competition in the thermal power sector is categorized into emerging and classical paradigms, with the latter showing a clearer window for investment from March to July [1][4]. - **Profitability Concerns**: The profitability of thermal power is influenced by fluctuations in coal and electricity prices, with market confusion regarding electricity pricing limiting profit expectations [1][6][7]. Additional Important Content - **Valuation and Profitability**: The thermal power sector has opportunities, but systemic valuation expansion remains uncertain. The market has not shown significant valuation increases despite initial expectations during the 14th Five-Year Plan [2][3]. - **Green Energy Transition**: The green energy sector is in a reversal phase, with policies like Document 136 alleviating concerns over long-term project returns, signaling a recovery in the fundamental outlook [2][18]. - **Regional Pricing Dynamics**: In Guangdong, coal prices fell by 20%, but electricity prices remained stable, indicating a complex relationship between coal and electricity pricing [13][16]. - **Long-term Investment Value**: The thermal power industry shows long-term investment potential, with companies experiencing significant revenue growth compared to broader market indices [9][30]. - **Green Certificate Market**: The green certificate market has faced supply-demand imbalances, but recent policy changes are expected to stabilize the market and improve transaction volumes [21][22]. Conclusion - The public utility sector, particularly thermal power, is navigating a complex landscape influenced by coal prices, regulatory reforms, and market dynamics. Investors are advised to focus on companies with strong dividend yields and favorable positioning in the evolving energy landscape. The green energy sector is also poised for recovery, presenting potential investment opportunities.

Core Viewpoint - The Southern Regional Electricity Market has officially launched its continuous settlement trial operation, marking a significant milestone in the electricity market reform initiated ten years ago in China [1][2][3]. Group 1: Market Launch and Structure - The continuous settlement trial operation covers five provinces: Guangdong, Guangxi, Yunnan, Guizhou, and Hainan, and is part of a broader effort to reform the electricity system in the southern region [1]. - The Southern Energy Regulatory Bureau has developed a regional market rule system characterized as "1+N+5X," which integrates national rules and regional frameworks while ensuring comprehensive participation from various market entities [1][2]. Group 2: Collaborative Governance and Innovation - A collaborative governance model has been established, involving government, grid operators, and market participants, to ensure synchronized policy-making and market practices [2]. - The Southern Energy Regulatory Bureau has initiated 12 key projects, including market liberalization for priority generation plans and cross-province congestion management, to address challenges in the reform process [2]. Group 3: Future Directions and Challenges - The launch of long-cycle settlement trial operations represents a comprehensive evaluation of ten years of research and will test the market operation and regulatory capabilities [3]. - The Southern Energy Regulatory Bureau aims to ensure the stability of the reform process and contribute replicable practices and regulatory solutions for the national unified electricity market [3].