By staff reporters Liu Jingjing, Li Qiyan, Yang Yue, Wang Xu, Wnag Lu and Liu Zhihao

Part I - A Rising Tide of Water Prices
Part II - Electricity Price Reform: Still Putting the Cart before the Horse
Part III - Natural Gas -- Pressure from the West
Analysis: Room for Change

(Caijing Magazine) Rising national water prices since April are a likely indicator of increases in other utility prices.

As of August, more than ten cities nationwide had held public hearings about raising water prices, and several major cities including Tianjin, Nanjing, Kunming and Shanghai have implemented price hikes. Rising electricity and gas prices cannot be far behind. A National Development and Reform official speaking on condition of anonymity described raising prices as "the most important task" facing pricing departments.

At first glance, price increases reflect product scarcity leaving little room for complaint. But in commodities that involve Chinese living standards, higher prices without comparable industry restructurings, is unacceptable. Unfortunately, during this current wave of price adjustments, rising utility prices inevitably will outpace reform.

We call this a mere "price increase" instead of "reform" because reform should encompass some form of economic justice, market reforms such as breaking up monopolies, increasing competition, improving efficiency, none of which are included in the current stage of adjustments.

Rational pricing, reflecting the degree of scarcity and the need to conserve resources, is appropriate. But increased earnings should not accrue as a windfall to suppliers through price increases. The current pricing mechanism, i.e. compensating for costs, should be re-examined. The cost differential between suppliers can be vast. Replacing high-cost public commodity suppliers with low-cost suppliers has long been the international model.

Chinese pricing is a three-way game involving the government, suppliers and the consumer. But the consumer is hardly allowed to play -- there are too few suppliers to provide a healthy market. Without reform, increases in utility prices will always be difficult to justify, and consumers will never respect them.