A move intended to reduce consumer burdens to boostconsumption. Hebei’s gas
consumption fell sharply this year(-7%/-11%/-32% YoY in Feb/Mar/Apr). The new
guidanceshowed a clear government intention to monitor transmissioncost more
closely, cut the cost, and release the pent-up demandfor gas. The existing IRR
cap of 8% has failed to work in thepast. The new requirements, especially the 7%
cap on ROE,seem more stringent. Although the new guidance may be furtheramended,
we see clear signals for new reforms on tariffs.
