Financing and allocating of electric universal service fund in China

The reform towards a more competitive regime in electricity sector in China raises the relevant question of funding for universal service obligations (USOs). With the great success achieved in telecommunication and other relevant network utilities, we have had the basic idea that universal service fund (USF) will be the main mechanism of funding for electric universal service obligation in China. In the situation that many academicians have concentrated in the telecommunication universal service fund, this paper focuses on two major aspects of electric universal service fund in China: financing and allocating. We show that funding through additional charge on price or sales revenue could be picked as the best mode for electrical USF, and design a procedure to allocate funds efficiently and fairly. This result no longer holds when the power market actualizes competition.