How to Read China's Power Market Risk Management: The Six Spot-Market Risk Types, Who May Intervene and When, Price Limits and Secondary Limits, Retailer Performance Guarantees, Collusion Rules, and the Provincial Risk Plans Being Approved in 2025–2026

Short answer. China's market rules treat 'risk management' as three layers. First, the national rules name the risks: the 2023 spot rules list six (supply-demand, abnormal price, system security, technical system, cybersecurity and contract performance) and the 2025 medium- and long-term rules list six of their own, adding unfair competition and contract default. Second, they assign the work: the market operator monitors ex ante and in-process, issues warnings, drafts risk-handling plans that are executed only after the NEA dispatched office and provincial authorities have examined and approved them, and reports; the regulator writes the intervention rules for suspension, interruption and resumption. Third, they set the tools: government bodies may temporarily interrupt the market, interrupt the execution of rules or impose price controls on six triggers, operators must intervene themselves on serious grid or system failures, interventions are recorded and the original intervention log published (accident-grade cases excepted), units left below verified cost are settled at that cost, and retailers post performance guarantees that the exchange tracks daily during spot settlement trial operation. Two regulator releases from 2025 and 2026 show the provincial layer: Xinjiang's three market plans and Jiangsu's eight-category, four-level plan were approved by the NEA's regional offices. This guide reads the texts in that order.

1. What counts as a risk

The spot rules (发改能源规〔2023〕1217号, trial) define six risk types: supply-demand risk (supply or demand swinging beyond the normal forecast deviation), abnormal price risk (prices persistently high or low, or swinging, beyond the normal range in some periods or areas), power-system operational security risk, market technical-support-system risk, cybersecurity risk, and performance risk on wholesale and retail contracts caused by loss of credit, disputes or force majeure.

The 2025 medium- and long-term rules (发改能源规〔2025〕1656号) list supply-demand imbalance, abnormal price, unfair competition, technical-system abnormality, contract default and other risks. The annex defines unfair-competition risk as participants illegally exercising market power to manipulate prices, withholding capacity, reaching monopoly agreements, colluding on bids or gouging prices where this seriously affects trading results, and contract-default risk to include loss of credit or performance capacity, disputes and force majeure.

The two lists overlap but are not identical: the spot list names system security and cybersecurity, the medium- and long-term list names unfair competition and default. A reader checking a provincial plan should expect it to map onto one or both lists; Jiangsu's plan, for instance, defines eight categories including unfair competition, trading default and abnormal behaviour.

2. Who does what

The Basic Rules for Electricity Market Operation (NDRC Order No. 20, 2024) require every market to establish a risk prevention and control mechanism, make the electricity regulator responsible for the intervention rules on market suspension (暂停), interruption (中止) and resumption and the conditions for intervention, and put monitoring and risk-prevention duties on market operating institutions under the principle 'whoever operates prevents; whoever operates monitors', subject to regulatory supervision. They also prohibit unlawful interference with market operation and local protection, market segmentation, designated trading and regional barriers.

Under the spot rules, monitoring is mainly ex ante and in-process. The operator issues warnings and reports them to the NEA dispatched office and provincial authorities; it drafts the risk-handling plans (risk levels, measures, each party's duties), rolls them forward, and may only execute them after those authorities have examined and approved (审定) them; when a risk occurs the parties act under the pre-set plan and disclose how it was handled. The medium- and long-term rules add that each region must prepare risk prevention and handling plans, that the operator monitors and warns, and that in an emergency the operator executes intervention under government provisions and submits a report within 3 days.

The Electricity Market Supervision Measures (NDRC Order No. 18, 2024) close the loop on the regulator's side: operators must monitor and prevent risk and submit periodic market-monitoring analysis reports; oversight of unfair competition and collusive bidding extends to the wholesale-market trading conduct of retailers, users, storage companies, virtual power plants and load aggregators; and the regulator may handle non-performance, abuse of dominance to manipulate prices and non-disclosure as dishonest acts under the relevant provisions, include them in the credit system and apply graded supervision. The September 2025 guideline for continuous-spot regions asks for a standardised intervention mechanism with clear triggers, implementing bodies and procedures, graded and classified intervention, and closed-loop recording, reporting, disclosure and post-review.

3. Intervention: triggers, tools, records

The spot rules split intervention into government intervention and operator intervention.

Government intervention. The NEA dispatched office and the provincial price and other authorities may decide to interrupt market operation temporarily, interrupt the execution of some or all rules, or impose price controls when supply is severely short, the market is not run per the rules, the rules need major revision, malicious collusion seriously affects results, prices reach the limit and trigger the control conditions, or in other cases they judge necessary; the operator carries out the decision.

Operator intervention. The operator itself must intervene on a safety-first basis — cancelling clearing results and running generation and consumption plans — when a system fault causes a major change in network topology, or overall or local grid stability is broken so as to seriously endanger grid security, when a major natural disaster or emergency creates a large grid operating risk, or when a major failure of the technical-support system prevents clearing and dispatch under the rules, and must report quickly.

Records and money. Operators must record the reasons and measures of each intervention and file them with the authorities, and publish the original intervention log (time, personnel, operation, reason), except for cases that fall under the accident grades of the Electricity Safety Accident Regulation. If intervention leaves a unit's total generation revenue below its verified total generation cost (including the start-up cost of units called from shutdown), the unit is settled at that verified cost. Where price control is used, the controlled price is set from supply and demand, the scarcity value of electricity and unit variable costs, with a settlement linkage.

Interruption and resumption. Market interruption (中止) is decided by the authorities when measures other than interruption cannot restore normal operation, and the operator publishes an interruption statement at once; resumption requires the authorities' consent and advance notice to participants.

4. Price limits as a risk tool

The spot rules require a bid price limit and a clearing price limit, with the bid limit inside the clearing-limit range. Once prices have stayed at the limit for longer than a set time, a secondary price limit may be set and executed; its upper value may reference the long-term average price and is generally below the normal limit. Limits are to consider marginal unit cost, supply-demand, value of lost load and economic development, and regions without a capacity-cost recovery mechanism should consider fixed-cost recovery when setting the limit. Reaching the limit and triggering the control conditions is itself one of the six government-intervention triggers.

5. Counterparty risk: guarantees, exposure, credit

Retailer guarantees. The 2021 Retail Company Management Measures require a retailer, before trading, to lodge a performance guarantee or insurance for the larger of two amounts, each calculated at not less than a standard rate: 0.8 fen/kWh on its wholesale volume over the past 12 months, and 5 fen/kWh on the larger of its wholesale or retail volume over the past 2 months; local authorities in spot-market regions may raise the standard. During spot settlement trial operation the exchange tracks the guarantee against the retailer's operating exposure daily (weekly elsewhere) and the retailer must top up within 3 working days of notice. A retailer that refuses to top up after a written reminder loses further trading eligibility, is publicised on the trading platform and 'Credit China', faces dishonesty sanctions against its legal representative and other responsible persons, and has its signed but unperformed contracts transferred to other retailers through the trading platform after the local authority consults the parties' wishes.

Bid limits. The medium- and long-term rules set bid limits for retailers, virtual power plants and load aggregators from risk-absorbing conditions such as registered total assets, performance-guarantee amount and the historical consumption of the users they represent or aggregate, and state that contract signing should help stabilise expectations, prevent market risk and secure supply and demand.

Settlement. The 2025 metering and settlement rules task the exchange with settlement-risk assessments of participants; a grid company may draw on a retailer's guarantee, deposit or other collateral when it fails to pay in full and on time; and a user who, after being urged to pay, still has not paid within a reasonable period may have supply suspended by the grid company under nationally prescribed procedures, with the arrears recorded in its credit file.

Regional practice. The NEA Southern Regulatory Bureau's December 2025 notice, issued to implement the NDRC/NEA notice on 2026 medium- and long-term contracting (发改运行〔2025〕1502号), asks exchanges to watch related-party trades and trades that clearly deviate from the market average price for the purpose of transferring or extracting benefits, to assess retailers' performance risk, where necessary to improve exposure-calculation models, to monitor and warn on exposure daily, and to revise their risk-handling plans; it also bans 'yin-yang' contracts that fabricate goods or inflate amounts. Fujian's 2026 scheme, as described by the provincial DRC, raises a retailer's guarantee step by step with its contracting shortfall and feeds that into the retailer's credit evaluation. By a notice dated 13 October 2026 the NEA General Office opened a consultation, with comments due within 30 days of publication, on a draft national credit-evaluation guideline for the unified market; it is a draft and not in force, and its content is not described here.

6. Conduct risk: the 2024 collusion notice

The NEA General Office's November 2024 notice (国能综通监管〔2024〕148号) states that supervision had found some participants violating trading rules and colluding on bids. It requires bids to reflect fixed costs, fuel costs and supply-demand; requires each registered entity in principle to bid independently; bans collusive bidding by oral or written agreement and centralised bidding by generators made up of several plants when they trade energy; bans generators with retail arms from using the 'generation-and-retail' advantage to grab market share by directly or indirectly lowering their own retail company's purchase cost, and from treating private and other retailers and large users differently; and requires operators to monitor violations and report half-yearly to the NEA and its dispatched offices.

7. The provincial plans now appearing

Two regulator releases show what the provincial layer looks like.

• Xinjiang: the NEA's Xinjiang office approved the medium- and long-term market risk-prevention plan in June 2025 and then the spot and ancillary-service market plans (release of 28 November 2025). Operators must evaluate implementation quarterly and hold at least two emergency drills a year; the release lists supply-demand imbalance, price volatility, participant violations and technical-system security as the risks faced.
• Jiangsu: in September 2026 the NEA's Jiangsu office approved a risk-prevention and handling plan (trial) and a library of typical handling measures covering the medium- and long-term, spot and ancillary-service markets, with eight risk categories (including unfair competition, trading default and abnormal behaviour) and four risk levels, separate exchange and dispatch responsibilities, and detailed procedures for intervention, interruption and resumption with reporting requirements by level.

Neither plan text was retrieved; the guide cites only what the regulators' releases say.

Reading table

Checklist

CNWattHub editorial method, not a sourced rule:

1. Ask the exchange for the approved risk-handling plan (or at least its risk categories and levels) and for the market's bid and clearing limits and any secondary limit.
2. Read the intervention log history: the spot rules require publication of the original log except for accident-grade cases, so an absence of records is itself informative.
3. For a retailer counterparty, check the guarantee amount against the 0.8 fen / 5 fen rule and the provincial add-on, and whether the exchange tracks exposure daily.
4. For a generator, confirm that bids are in principle submitted per registered entity, that no collusive bidding agreement exists and that a multi-plant generator does not bid centrally in energy trading; the 2024 notice makes these supervision targets.
5. Model a 'verified cost' outcome for the hours an intervention may cover, because a unit whose revenue during intervention falls below its verified total generation cost is settled at that cost.
6. Watch the 2026 draft credit-evaluation guideline for changes to the credit rules above; it is not in force.

Scope limits

National rules and four regional or provincial documents only. No provincial plan text, risk-level threshold, intervention record, default statistic or exposure figure is quoted. The 2026 contracting notice 1502号 is cited only through the documents that cite it, and the 2026 draft credit-evaluation guideline is not described. Not legal, regulatory or investment advice.