The World Bank Asia Sustainable and Alternative Energy Program 61152 China Social Analysis of Heating Reforms in Liaoning Province November 2009 Photo credits: World Bank. The findings, interpretations, and conclusions expressed in this report are entirely those of the authors and should not be attributed in any manner to the World Bank, or its affiliated organizations, or to members of its board of executive directors or the countries they represent. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility whatsoever for any consequence of their use. The boundaries, colors, denominations, and other information shown on any map in this volume do not imply on the part of the World Bank Group any judgment on the legal status of any territory or the endorsement or acceptance of such boundaries. Table of Contents Abbreviations and Acronyms ....................................................................................................vi Currency ......................................................................................................................................vi Acknowledgments .....................................................................................................................vii Executive Summary ....................................................................................................................1 1. Introduction ............................................................................................................................7 1.1 Background....................................................................................................................................................7 1.2 Objectives of the Report ...............................................................................................................................8 1.3 Research Methodology .................................................................................................................................8 1.4 Questionnaire ................................................................................................................................................9 1.5 Fieldwork Implementation .............................................................................................................................9 2. Household Characteristics .................................................................................................. 11 2.1 Housing Conditions .....................................................................................................................................11 2.2 Household Demographics ...........................................................................................................................13 2.3 Household Income ......................................................................................................................................15 3. Household Energy Usage: Consumption and Expenditure..............................................19 3.1 Energy Sources by Purpose ........................................................................................................................19 3.2 Appliances and Usage .................................................................................................................................20 3.3 Energy Expenditure .....................................................................................................................................20 4. Space Heating: Quality, Consumption, Billing, and Payment ..........................................23 4.1 Access to Heating Systems ........................................................................................................................23 4.2 Quality of Heating Services .........................................................................................................................24 4.3 Billing for Heating Services..........................................................................................................................28 4.4 Heating Subsidies: Coverage and Amount ..................................................................................................28 4.5 Payment for Heating Services .....................................................................................................................30 iii iv Contents 5. Heating Reform: Perception, Preference, and Willingness to Pay ...................................35 5.1 Awareness of Heating Reform ....................................................................................................................35 5.2 Replacing Small Boiler Houses with Centralized Heating Systems.............................................................35 5.3 Willingness to Pay for Improved Services ...................................................................................................37 5.4 Indirect to Direct Subsidies .........................................................................................................................39 5.5 Consumption-Based Billing..........................................................................................................................40 5.6 Payment Mechanisms .................................................................................................................................42 6. Monitoring Social Risks.......................................................................................................43 6.1 Potential Risks .............................................................................................................................................43 6.2 Strategies for Dealing with Potential Social Risks .......................................................................................44 6.3 Monitoring Social Risks ...............................................................................................................................45 Appendix A Survey Questionnaire ...........................................................................................................................................47 Figures 2.1 Employment Status of the Respondents .............................................................................................................14 2.2 Income, by Quintile ..............................................................................................................................................16 2.3 The Poor and the Near-Poor .................................................................................................................................17 4.1 Heating Fuel for Households Not Connected to a Heating System .....................................................................24 4.2 Households' Coping Strategies for Dealing with Inadequate Heating Service .....................................................27 4.3 Reasons for Not Paying 100 Percent of the Heating Bill ......................................................................................32 4.4 Perceived Consequences if Heating Bill Is Not Paid in Full ..................................................................................33 5.1 Air Quality and Centralized Heating Systems .......................................................................................................37 5.2 Willingness to Pay for Improved Heating Services...............................................................................................37 5.3 Perceptions of Direct Subsidies by Income Level ................................................................................................40 5.4 Reasons for Paying Heating Bills over Longer Period of Time .............................................................................41 Tables 1.1 Distribution of Sample in the Survey ......................................................................................................................9 2.1 Type of Housing (%) .............................................................................................................................................11 2.2 Home Ownership (%)...........................................................................................................................................12 2.3 Building Vintage (%) .............................................................................................................................................12 2.4 Housing Space and Number of Rooms ................................................................................................................12 2.5 Housing Insulation Conditions (%) .......................................................................................................................13 2.6 Housing Facilities (%) ...........................................................................................................................................13 2.7 Household Demographics ...................................................................................................................................13 Contents v 2.8 Education Level of Respondents (%) ...................................................................................................................14 2.9 Number of Employed Persons in the Households (%) .........................................................................................15 2.10 Household Income (RMB) ....................................................................................................................................15 2.11 Distribution of Income Sources ............................................................................................................................15 2.12 Distribution of Dibaohu (%) ..................................................................................................................................16 2.13 Income Profile of Dibaohu ....................................................................................................................................17 3.1 Energy Sources for Cooking, Heating Water, and Space Heating (%)..................................................................19 3.2 Use of Energy Appliances ....................................................................................................................................20 3.3 Difference in Electricity Expenditure ....................................................................................................................20 3.4 Energy Expenditure by Quintile ............................................................................................................................20 4.1 Access to Heating System, by City and Income (%) ............................................................................................23 4.2 Type of Heating System, by City (%)....................................................................................................................24 4.3 Type of Heating System, by Building Vintage (%) ................................................................................................24 4.4 Level of Satisfaction with Heating Conditions (%) ...............................................................................................25 4.5 Level of Satisfaction, by City (%)..........................................................................................................................25 4.6 Heating Condition, by City (%) .............................................................................................................................26 4.7 Quality of Heating Service (%) .............................................................................................................................27 4.8 Billing Systems, by City (%) .................................................................................................................................28 4.9 Percentage of Households with Heating Subsidies, by City (%) ..........................................................................29 4.10 Percentage of Households with Heating Subsidies (%) .......................................................................................29 4.11 Average Subsidy Mechanism and Subsidy Amount (%) ......................................................................................30 4.12 Average Percentage of Subsidy Received (%) .....................................................................................................30 4.13 Amount of Heating Bill, by City (RMB) .................................................................................................................30 4.14 Amount of Heating Bill, by Type of Heating System (RMB) (%) ..........................................................................31 4.15 Amount of Payment of Heating Bills, by City (RMB) ............................................................................................31 4.16 Amount of Heating Bill Paid (%), by Type of Heating System and Subsidy .........................................................32 4.17 Out-of-Pocket Expenditure, by Quintile ................................................................................................................33 5.1 Awareness of Heating Reform (%).......................................................................................................................35 5.2 General Satisfaction Level: "Quality" Central Heating System and Small Boiler (%) ..........................................36 5.3 Willingness to Pay for Improved Services (%) .....................................................................................................38 5.4 Logit Model of WTP for Improved Systems .........................................................................................................38 5.5 Perception of Shifting from Indirect to Direct Subsidies (%)................................................................................39 5.6 Perception of Shifting from Indirect to Direct Subsidies and Subsidy Amount (%) .............................................39 5.7 Percentage of Households Supporting Consumption-Based Billing (%) ..............................................................40 5.8 Household Behavior Change under Consumption-Based Billing System (%) ......................................................40 5.9 Acceptance of Paying Bill over Longer Time Period, by City (%) .........................................................................41 Abbreviations and Acronyms IS-LSSA Institute of Sociology of Liaoning m2 meters squared Social Sciences Academy RMB Renminbi, Chinese yuan LASS Liaoning Academy of Social Sciences LPG liquefied petroleum gas LMC3 Liaoning Third Medium Cities SOE state-owned enterprise Infrastructure Project WTP willingness to pay Currency USD 1 = 7.69 RMB (May 07 average) USD 1 = 7.62 RMB (2007 average) vi Acknowledgments The report, funded by the Asia Sustainable and Alterna- Dianzhong, Director of the Institute of Sociology of LASS. tive Energy Program, was authored by Dr. Xun Wu, a The report was peer reviewed by Julian Lampietti, Lead World Bank consultant, and Mr. Gailius Draugelis, Task Program Coordinator, Sustainable Development Depart- Team Leader of the activity. Design and implementa- ment, Middle East and North Africa Region, World Bank, tion of the survey, and valuable comments on the final and Mingxen Zhou, Social Development Specialist, Sus- report, were provided by the Liaoning Academy of Social tainable Development Department, East Asia and Pacific Sciences (LASS) under the direction of Professor Shen Region, World Bank. vii Executive Summary Centralized heating, commonly known around the world as district heating, is growing rapidly in China as urban areas increase, making China the fastest-growing district heating market in the world. Until recently, most consum- ers working for government entities and state-owned enterprises (SOEs) did not directly pay for heating; this cost was paid by their work units. District heating has thus been characterized as one of the last vestiges of the welfare state in China. Consumers pay for heating largely on the basis of apartment floor area; transitioning to consumption-based billing has long remained on the reform agenda. Thousands of companies operate heating systems, from large networks to small, one-boiler systems. As part of its efforts to increase energy conservation and reduce emissions, the government of China has made strong efforts to accelerate reforms. Smaller boilers with poor poorest 20 percent of the population. Since many social emission controls are being replaced by more efficient assistance programs focus only on households desig- district heating networks with improved pollution con- nated by the government as the poorest (the dibaohu), trol equipment. In many cities, meters are mandatory the heating subsidy targeting mechanism may need to in new buildings; two-part heat tariff methodologies are be reconsidered. Despite heightened concern about ris- being piloted; responsibilities for heating bills have been ing heating prices due to reforms, the survey reveals largely transferred to households, with some additional widespread support for these reforms, especially for subsidies; and low-income subsidy programs have been consumption-based billing. started. Liaoning is in northeast China. Winters are cold and there The district heating industry in China faces many chal- is a clear need for effective household heating. It is an lenges. Higher incomes are creating demand for important province with a long-standing, large industrial better-quality heating services. Consumption-based bill- base developed under the planned economy. Thus, it has ing and consumers' control of their heating requires a faced difficult challenges during the market-based eco- new, customer-oriented business approach. This is a nomic reforms and a significant effort has been under difficult transition for companies that have been oper- way for several years to revitalize the region and improve ating as monopolies for decades. Moreover, the new its quality of life. tariff regimes will likely create more uncertainty in rev- enues in the short term, as tariffs are currently calcu- Urban heating demand in Liaoning has grown rapidly due lated on estimated demand, which may not reflect real to rising incomes, housing sector growth, and the privati- consumption. zation of housing. The heating supply has been unable to keep pace with this surging demand. Although many cities This is a report on a survey of medium-size cities in Lia- have replaced their use, small coal-fired boilers continue oning Province in 2007. The results provide a snapshot to provide the bulk of heating services in many cities, and of the challenges the district heating industry faces in dif- the capacity to expand the heating system while main- ferent cities. Overall, they reveal a need to improve the taining satisfactory service has been constrained by the quality of services. Specifically, they indicate that the new low level of energy efficiency. The use of small coal-fired heating subsidy programs may need to be expanded to boilers has been considered a major source of air pollu- address the significant burden heating costs place on the tion during winter months in many cities. 1 2 China: Social Analysis of Heating Reforms in Liaoning Province Heating system reform has been a policy priority for the The survey--a household questionnaire, in-depth inter- Liaoning provincial government. Although implementa- views, and group discussions--was conducted in tion remains uneven, reform efforts have been made in the five original LMC3 project cities of Benxi, Fushun, five areas: (i) discontinuing employer payment of heating Gongchangling, Haicheng, and Yingkou in May 2007. It bills by making households responsible for payment; (ii) included households with centralized heating, with small introducing heat metering and billing based on consump- boilers, and with no functional heating system. tion; (iii) developing safe, clean, and demand-responsive heat supply systems; (iv) reforming heat pricing; and (v) The main purpose of the social analysis report is to pres- accelerating reform of heating enterprises through con- ent the findings of this survey, which focuses on the solidating small enterprises, introducing competition, impact of changes in billing and pricing, heating quality, and fostering and standardizing the heating market. the extent of social assistance programs for heating, and the degree of public awareness of heating reforms. Will- The World Bank was invited by Liaoning Province to ingness to pay for improvements in heating services and support the Liaoning Third Medium Cities Infrastructure possible changes in the consumption patterns of energy Project (LMC3), which coincides with these recent gov- users are also considered. ernment initiatives in heating reform. This project included nine district heating subprojects aimed at improving the The findings will inform the World Bank's and Liaoning's energy efficiency and environmental performance of experts of trends in heating from the household perspec- heating systems in selected areas of five original proj- tive as they work together on heating reform issues. They ect cities--Benxi, Fushun, Gonchangling, Haicheng, and are also intended to help inform future project design and Yingkou.1 policy dialogue. The LMC3 includes in its project design the following The survey reveals that people pay more for heating features: (i) replacing use of small, old boilers with new services than just their heating bill, as they purchase centralized heating systems; and (ii) ensuring that new additional heating powered by other sources, primarily centralized heating system designs are compatible with electricity and to some extent gas. Additionally, other heating supply sector reform. The latter includes install- energy expenses also are significant. The reported aver- ing meters on boilers, in substations, and on a pilot age monthly expenditure for energy, excluding central- basis in buildings. These will provide heat-demand data ized heating, is 116 RMB, or 6.8 percent of household needed to determine tariffs, optimize heating supply income. For dibaohu (families designated low-income by system designs, and manage system operations. LMC3 the government) surveyed, 24 percent of their income is also includes piloting energy-efficient technologies, such spent on these energy sources, excluding out-of-pocket as building-level substations that can reduce pumping expenditures to pay for centralized heating systems. Very costs, pipeline costs, and heat energy use, as well as few households have access to hot tap water; some use improve the responsiveness of the system to changes in indoor electric or gas water heaters to meet their hot end-user demand. water demands. 75% of respondents use an electric blanket on average 4.1 hours per day either as a primary Because many subprojects and cities are involved, Lia- or supplementary source of heating. oning Province agreed that the Bank would carry out a survey that objectively and systematically collected infor- Affordability will be a significant social risk as heating mation about the status of the current heating situation reforms are fully implemented. While current subsidies in the proposed project cities. In addition, with major successfully reduce out-of-pocket heating expenses, central government initiatives under way to promote the subsidy mechanism could be improved. Household centralized heating supply sector reform, the survey also heating bills amount to 4.2 to 22.8 percent of house- collected information about the extent and impact of hold income, and an additional 4.8 to 24 percent goes to heating reforms. other energy services. After heating subsidies provided by employers or the government, out-of-pocket expendi- tures for heating are only 2.4 to 10 percent of household income. Heating expenditure is responsible for a signifi- 1. The total number of municipalities at Board approval is nine and cant portion of household income for households without includes Benxi, Benxi Nanfen, Yingkou, Yingkou Economic Develop- heating subsidies, especially the poor. For poor house- ment Zone (EDZ), Yingkou Dashiqiao, Gonchangling (in Liaoyang), holds connected to heating systems, the out-of-pocket Haicheng (in Anshan), Fushun, and Huludao. payment for heating takes about 10 percent of their Executive Summary 3 annual income. The problem is especially pronounced than expected because older SOEs may no longer be for poor households that are not eligible for public assis- able to afford heating subsidies. Additionally, households tance programs. The current public assistance programs reported receiving on average less than 80 percent of are inadequate to deal with the needs of the poor house- the total subsidy they should be provided. Greater super- holds. This is an area to which attention could be paid in vision of subsidy delivery mechanisms appears to be future policy design. needed. The main sources of household income are salary and Centralized heating provides the potential for cleaner pension; public assistance programs contribute a very and more efficient heating services, but this is not guar- small share of total income. This is so even for house- anteed unless professional services are provided. More holds designated by the government as dibaohu--15 than half of the apartment buildings surveyed were built percent of households in the survey. Due to funding con- after 1990, but despite their relative newness, the heat- straints, many poor households are not eligible for any ing conditions in many are unsatisfactory. Households public assistance programs, and the average household reporting a room temperature of 16° C for 24 hours income in the first quintile is lower than that of dibaohu. recorded the highest level of satisfaction--but this group This suggests the near-poor may suffer more economic was only 34 percent of the total, suggesting the industry hardship than dibaohu. has to pay attention to ensuring high quality and cost- effective technical designs, efficient management, and In the 2007 survey, average household income per quality of service. annum was 20,421 RMB, but there are sizable dispari- ties among households. Households are divided into five The majority of households have access to some form of groups based on income level, and the average income heating system, mostly small boiler systems. However, in the first quintile (bottom 20 percent) is roughly one- a significant percentage are not satisfied with the service seventh of that in the fifth quintile (top 20 percent). In quality of their systems. Based on the survey, only 14 the survey, the richest quintile receives subsidies that percent of households connected to centralized heating reduce their heating expenditure by half. About 42 per- systems are either "satisfied" or "very satisfied" with cent of those surveyed reported having a no household the service quality. Many supplement heating consump- member with formal employment. tion with electric heaters and electric blankets. About half (47 percent) of surveyed households in the Despite the relative dissatisfaction with levels of service sample received some level of heating subsidies for the and concern over heating bills, consumers continue to 2006­07 heating season. However, there are substantial pay their heating bills. Despite unsatisfactory services variations across the five cities. In Haicheng, 9 percent and high levels of out-of-pocket payment for heating, the of households received heating subsidies; in Benxi, 76 collection rate in the household areas surveyed has been percent. Often these subsidies are linked to access to reasonably high. Households on average currently pay 95 heating systems; only 12 percent of households without percent of their heating bills, and about 90 percent of access to heating systems received subsidies. Among households pay 100 percent of their bills. Most respon- households receiving subsidies, 80 percent obtained dents are convinced that their services will be cut off if them from the employers of household members, and they fail to pay their bills. about 17 percent obtained them through various public assistance programs for low-income families. On aver- The majority of households are willing to pay for improved age, households with heating subsidies received 1,070 heating systems. Willingness to pay is closely associated RMB, or 74 percent of the average heating bill for the with income level and heating subsidies, as well as the 2006­07 heating season. level of satisfaction with the current existing heating con- dition. An overwhelming majority of households support These observations suggest that a better targeting consumption-based billing. There is less enthusiastic mechanism could be designed to provide subsidies to support for the shift from indirect to direct subsidies, that the most needy. In particular, the poor households that is, from nonwage benefits paid directly to heating com- do not receive social assistance currently targeted at panies to formula-determined subsidies for households, dibaohu may need some assistance for heating expenses. either as cash allowances or direct payment to heating Two other subgroups of the poor may need coverage: companies. Among households that pay an entire sea- the formally unemployed who have no access to sub- son's heating bill upfront, most are in favor of spreading sidy channels and pensioners who may be receiving less payment over a longer period of time. 4 China: Social Analysis of Heating Reforms in Liaoning Province When implementing pricing and billing reform, policy mak- · It is necessary to consider the impact of the shift ers should take into account the following measures: to centralized heating on the consumption patterns of energy consumers. The survey findings indi- · Ensuring a safety net is in place for the poor, and cate that if heating quality is improved, consumers potentially broadening heating assistance programs would decrease their use of supplemental power to near-poor households, will address the potential and use the centralized heating as their primary if effects of possible changes in subsidies and pricing. not sole source of heating. It also suggests the pos- These survey findings mean that it is also necessary sibility that space heating costs will decline as the to reconsider the effectiveness of existing social efficiency of centralized heating improves and that assistance programs intended to meet the needs of a move to consumption-based billing would make poor households, especially the bottom 20 percent. energy users more energy conscious and could result in less consumption. · Implementing policies to support improved build- ing energy efficiency that would help reduce heat- · Projects should invest in technologies that enable ing bills and increase comfort--without increasing downstream heating reforms and provide techni- energy use. cal assistance to companies to help them become more professional and responsive to consumers' · Establishing regulations that define service stan- demands for improved service. dards and relations between heating suppliers and consumers under consumption-based billing would An adequate monitoring mechanism needs to be estab- address consumers' concerns about the poor quality lished to monitor the potential risks mentioned above. of heating. The monitoring mechanism is a continuous assessment · Benchmarking district heating utilities at the city of the social impacts of reforms over a long period of and provincial levels would help compare relative time. The emphasis of the monitoring mechanism is to operating performance of the utilities and customer understand how various social groups will be affected by satisfaction. heating reforms. Specific attention should be paid to vul- nerable groups, such as low-income families and house- · Consumer awareness and education programs holds suffering from unemployment. These and other should be carefully planned and implemented to vulnerable groups may need government subsidies to teach wise use of heating and to alert people that cope with the possible additional financial burden caused costs for heating will be different for every house- by heating reform. Another issue that needs consider- hold when based on meter readings. ation is the situation of the group of households that are · Establishing a billing regulation dealing with con- just above dibaohu status. These households are often sumer disconnections will ensure consumers know actually worse off than the dibaohu below them in terms their obligations to service providers and are pro- of income because they are not eligible for assistance. tected against abusive practices. The survey findings indicate that while there is a clear need for such social assistance programs, they currently · Conducting periodic household surveys to benchmark meet the needs of only a relatively small proportion of household perceptions will inform policy planning. the population. When designing projects that aim to extend centralized The following steps should be taken to strengthen the heating, authorities should take into account the follow- monitoring mechanism: ing factors: · Ensure that the public has an accurate perception · Replacing small boilers with centralized heating and awareness of heating reforms and their possible systems is perceived positively by households for consequences. Survey findings indicate that aware- various reasons, including expectations that heating ness and understanding are limited. Educating the quality and environmental conditions will improve. public on heating reforms, especially on changes in · Generally, households are willing to pay for improve- billing and subsidies, is necessary. ments, especially those that improve service. A high · Establish the monitoring and evaluation institution. percentage of people pay for supplemental heating This institution should be composed of experts and and will be willing to pay more than their current bills representatives from government and consumers. It for more efficient heating that requires no supple- should be independent from government and report mental heating. to the public. Executive Summary 5 · Set the quantitative and qualitative indicators for · Ensure the active involvement and contribution of monitoring purposes. These should cover such areas local communities--a crucial element in efforts to as satisfaction level with the heating systems, pric- monitor both the implementation of projects and the ing and billing, the percentage of household income consequences of reform. spent on heating services, and the level of public assistance programs for heating consumption. 1 Introduction 1.1 Background Urban heating demand in Liaoning has grown rapidly, due to rising incomes, housing sector growth, and priva- tization of housing. During the past decade, demand increased at an annual growth rate of 14 percent.2 Heat- ing supply has been unable to keep pace with this surging demand. Small coal-fired boilers continue to provide the bulk of heating services in most cities, and the capacity to expand the district heating system while maintaining satisfactory service has been constrained by low energy efficiency. Additionally, the use of small coal-fired boilers has been considered a major source of air pollution prob- lems during winter months in many cities. The current billing and payment mechanisms further exacerbate the situation. The urban heating service his- torically was treated as part of welfare support, and was poverty has been increasing.3 Poor households find it paid for either fully or partly by employers. In the wake increasingly difficult to pay for heating, as they often lose of economic reforms, many state-owned enterprises the subsidies linked to formal employment. Although (SOEs) in Liaoning have experienced financial difficul- there are government-funded schemes intended to sub- ties and have been unable to fulfill their obligations to sidize households below the poverty line, the resources pay for heating services for their employees. Heating available are very limited compared to the number of service companies, many of them either owned or oper- poor households in need. ated by the private sector, have reduced service quality in response, resulting in widespread dissatisfaction among Heating system reform has been a policy priority for consumers. both the central government and Liaoning provincial gov- ernment. In July 2003, the central government issued The heating supply shortages have disproportionately instructions to proceed with implementing heating sys- larger impacts on the poor. The unemployment rate in tem reform in pilot cities of China's 16 northern provinces Liaoning has risen since the end of the 1990s because and autonomous regions, including Liaoning Province. of retrenchments in many large SOEs. As a result, urban Reform is intended to address these key sector issues: (i) discontinuing employer payment of heating bill by 2. Asian Development Bank 2004. 3. Asian Development Bank 2004; Hussain 2003. 7 8 China: Social Analysis of Heating Reforms in Liaoning Province making households responsible for payment of the heat- It is anticipated that the elimination of small, old boilers ing bill; (ii) introducing heat metering and a billing system in city centers will have a positive local environmental based on consumption; (iii) developing safe, clean, and impact. Although conclusive data are not yet available to demand-responsive heat supply systems; (iv) reform- show the potential impact of improved heating systems ing heat pricing; and (v) accelerating reform of heating from project implementation, preliminary information enterprises by consolidating small enterprises, introduc- indicates that most households will welcome changes ing competition, and fostering and standardization of the brought about by the project, and that these changes will heat market. have a positive impact on air quality in project areas. Liaoning Province is currently implementing the Liaoning Third Medium Cities Infrastructure (LMC3) Project, which 1.2 Objectives of the Report is well timed to coincide with these recent initiatives. The main purpose of the social analysis report is to pres- The World Bank was invited by Liaoning Province to ent the findings of this household survey. The survey finance this project, which included nine district heating focuses on the impact of changes in billing and pricing, subprojects aimed at improving the energy efficiency heating quality, the extent of social assistance programs and environmental performance of heating systems in for heating, and the extent of public awareness of heat- selected areas of the project cities. ing reforms. Willingness to pay (WTP) for improvements in heating services and possible changes in the consump- Improvements will be achieved through investments in a tion patterns of energy users are also examined. series of technical innovations: Survey findings will inform the Bank's and Liaoning's · Replacing small, old boilers with new centralized experts of trends in heating from the household perspec- heating systems tive as they work together on heating reform issues. The · Extending centralized heat supply and ensuring that findings are also intended to inform future policy dialogue new centralized heating system designs are com- and district heating system design. patible with heating supply sector reform Specifically, the report's objectives are: · Modernizing boiler plants and substations, enabling them to efficiently regulate heat consumption and · To examine the implications of the impact of heat- respond to consumer controls ing reforms, specifically the changes in pricing and · Installing metering that will allow the introduction billing of consumption-based billing Capacity building and · To examine the effectiveness of the existing social knowledge transfer in management and operation assistance system in meeting the needs of poor of modern heating and gas supply systems. households Due to the many subprojects and cities involved, Liaon- · To assess the impact of the proposed project on ing Province agreed that the World Bank would carry out energy consumers' consumption patterns a survey that objectively and systematically collected · To assess public perceptions and awareness of heat- information about the current heating situation in the ing reforms (the key concerns of households) and to project cities. As major central government initiatives define measures to facilitate public acceptance. were under way to promote heating supply reform, the survey also collected information about the extent and impact of these reforms. 1.3 Research Methodology The survey--a household questionnaire, in-depth inter- The survey employed a combination of qualitative and views and group discussions--was conducted in the quantitative methodologies to allow in-depth analysis. originally proposed LMC3 project cities of Benxi, Fushun, The main sources of information for this report are a Gonchangling, Haicheng, and Yingkou. Preliminary find- wide-ranging household survey, in-depth interviews, and ings were shared with each city. The survey confirmed focus group discussions, including: popular support for replacing old, polluting boilers and for heating supply sector reform. Introduction 9 · A household survey in the five selected cities included in the project. The sample size comprised Table 1.1: DisTribuTion of sample in The survey approximately 2,000 households with standard error of no more than +/- 5 percent; number District of households percent · In-depth interviews and focus group discussions Fushun 400 20 with local government officials, heating service pro- Benxi 600 30 viders, and consumers. Yingkou 497 25 Haicheng 254 13 1.4 Questionnaire Gongchangling 250 12 Total 2,001 100 The questionnaire contains 91 questions and includes the following components: Source: Liaoning province medium-size cities household heating survey, June 2007. · Part 1: Housing condition (types, size, property rights, date of construction, and so on) · Part 2: Household energy consumption and expen- The piloting of the questionnaire was conducted in April diture 2007 in 47 households from five cities (Benxi, Fushun, Gongchangling, Haicheng, and Yingkou) covered by the · Part 3: Household heating condition and expen- proposed project. IS-LASS analyzed data from the pilot diture and consequently revised the questionnaire based on · Part 4: Knowledge of heating reforms and willing- the results. ness to pay for improved services The sampling method is stratified random sampling. · Part 5: Household socioeconomic condition (income, The distribution of the sample in the five municipalities expenditure, employment, and education back- roughly corresponds to the population sizes of these cit- ground). ies, and the strata for the sampling are heating condition and income (table 1.1). A complete questionnaire for the survey is attached as appendix 1. The following steps were taken to select households in the sample: 1.5 Fieldwork Implementation · Identifying communities included in the project areas based on project documents (feasibility studies) The Institute of Sociology of Liaoning Social Science · Randomly selecting two to four communities in each Academy (IS-LSSA) was selected to carry out the field- municipality work for the report, based on the quality of their pro- posal and their prior experience working with World Bank · Identifying the heating conditions in households in projects. the selected communities · Identifying low-income households (dibaohu) in the Their work was carried out in five stages in accordance selected communities with the Terms of Reference: 1) design of survey instru- ment and interview guide for in-depth interviews and · Randomly selecting households from each of the focus groups; 2) piloting of survey instrument; 3) sam- selected communities by using predetermined ratios pling; 4) implementation of fieldwork; and 5) data entry for different types of heating systems and percent- and analysis. age of low-income households. IS-LSSA designed the questionnaire and interview guide The fieldwork was conducted in May 2007 in the five in close consultation with a panel of international consul- cities. Seventy-five enumerators participated in the train- tants on the World Bank project team. The questionnaire ing workshop for the survey, and from them 50 were and interview guide underwent multiple revisions before selected to participate in the survey work based on their they were finalized for implementation. performance in the training workshop. The enumerators 10 China: Social Analysis of Heating Reforms in Liaoning Province conducted in-person interviews at the residences of discussions mainly involved various consumer groups, sample households. In total, data for 2001 households such as low-income family members, customers of cen- were collected based on the survey questionnaire and tralized heating systems, customers of small boiler heat- entered into the database. ing systems, and residents not connected to any heating systems. The in-depth interviews were with stakehold- Qualitative research work was conducted simultane- ers from heating service companies, relevant govern- ously. Six focus group discussions and six in-depth inter- ment officials, and technical personnel. views were conducted in each city. The focus group 2 Household Characteristics This section presents the household characteristics of sampled households. Information on housing conditions, household demographics, and income are discussed, and their implications for future project design for district heating systems and policy dialogue considered. 2.1 Housing Conditions Table 2.1 shows the basic characteristics of housing conditions of the sampled households in the five cities. The majority of households live in apartment buildings without elevators; about 10 percent of households live in one-story buildings. In Haicheng and Gongchangling, about 20 percent of households live in one-story build- ings; very few households in Fushun do so. Noticeably, The percentage of home ownership is quite high in the virtually no households (less than 1 percent) still live in sampled areas. Most households (90.54 percent) in the slum housing units (penghuqu), suggesting that signifi- sample own the housing units they live in instead of cant progress has been made by provincial and local gov- renting, although there is some small variation across ernments in improving living conditions. the five cities, ranging from about 84 percent (Benxi) to Table 2.1: Type of housing (%) fushun benxi yingkou haicheng gongchangling Total Apartment in a building with elevator 1.75 7.17 0.41 0.00 0.40 2.65 Apartment in a building without elevator 97.50 85.83 89.86 81.89 74.40 87.23 Apartment in one-story building 0.50 6.83 9.53 18.11 20.80 9.41 House (detached house or townhouse) 0.25 0.00 0.00 0.00 0.00 0.05 Slum housing unit 0.00 0.00 0.00 0.00 4.40 0.55 Others 0.00 0.17 0.20 0.00 0.00 0.10 Source: Liaoning province medium-size cities household heating survey, June 2007. 11 12 China: Social Analysis of Heating Reforms in Liaoning Province about 97 percent (Haicheng) (table 2.2). The high per- Table 2.3 shows that the majority of households (about centage of housing ownership might act as a favorable 60 percent) live in apartment buildings built after 1990-- condition for heating reform as it is in the home own- not surprising given the construction boom across China ers' long-term interests to have better heating services. over the past two decades. In general, newer apartment However, ownership will require an efficient billing sys- buildings are more likely to have some heating systems tem for homeowners to share costs, not only for heating installed. within apartments, but also heating of the common areas of the building (stairways, hallways, and so on). In the Households in the sampled areas live in relatively small discussion groups in Yingkou, some citizens suggested apartments (table 2.4). The average total space is 61.09 that heating fees should not be charged according to the m2 (657 sq ft) across the five cities and average living gross area of the residence, as this includes common space is 41.44 m2 (441 sq ft). The respondents in Ying- areas and areas without heating, and instead should be kou and Haicheng occupy relatively larger apartments calculated according to the actual residential area. than those in the other three cities. Table 2.2: home ownership (%) fushun benxi yingkou haicheng gongchangling Total Own 86.3 84.3 95.8 97.2 95.2 90.5 Rent 11.0 14.9 3.4 1.2 3.2 8.1 Other 2.8 0.8 0.8 1.6 1.6 1.4 Source: Liaoning province medium-size cities household heating survey, June 2007. Table 2.3: builDing vinTage (%) fushun benxi yingkou haicheng gongchangling Total Before 1980 9 9 8 2 33 11 1980­1989 34 43 13 17 9 26 1990­2000 55 48 40 77 45 50 After 2000 2 0 38 4 12 13 Source: Liaoning province medium-size cities household heating survey, June 2007. Table 2.4: housing space anD number of rooms city average total space (m2) average living space (m2) average number of rooms Fushun 57.91 37.17 2.42 Benxi 48.23 35.03 2.23 Yingkou 75.06 51.25 2.87 Haicheng 71.60 46.39 2.81 Gongchangling 58.02 37.31 2.50 Total 61.09 41.47 2.53 Source: Liaoning province medium-size cities household heating survey, June 2007. Household Characteristics 13 Table 2.5 shows the insulation condition for households ethnic group, with the Man ethnic group a distant second in the sampled areas. The majority of households live in (5.67 percent). Around 70 percent of the respondents are apartments with double pane windows (81.66 percent) married, while nearly 25 percent are single. In Fushun, and insulated doors (66.65 percent). There are, however, about 10 percent of respondents are divorced or wid- considerable variations across the five cities. The percent- owed while the same group comprises less than 2 per- age of households with double pane windows ranges cent in Haicheng. from 60.8 percent in Gongchangling to 97.1 percent in Haicheng, while the percentage of households with insu- Table 2.8 shows that most respondents have an educa- lated doors ranges from 38.8 percent for Gongchangling tion level of high school or above, and there are only small to 86.4 percent for Yingkou. Although it is difficult to variations across the five cities. The relatively high level ascertain through household surveys, these results indi- of education of residents in the sampled areas should be cate that there is considerable variation in housing ther- favorable for undertaking heating reforms because it is mal efficiency across the cities. Enforcement of stricter important for households to understand and appreciate thermal efficiency building standards will not only reduce the reform initiatives. coal consumption but also will improve the heating levels in individual apartments. Figure 2.1 shows the employment status of respondents. About 45 percent hold paid jobs in a variety of organiza- While almost all households have access to tap water tions, such as SOEs, private businesses, joint ventures, (table 2.6), very few have access to hot tap water (6.67 and government agencies; about 16 percent of respon- percent). Some households use indoor hot water heat- dents are currently unemployed (including forced early ers (about 30 percent) to meet the needs for hot water; retirement). The high percentage of unemployed respon- this varies from city to city. In Gongchangling only 12.8 dents suggests that the heating reform might impose a percent of households use hot water heaters; about 50 financial burden in some households, as heating subsi- percent of households use them in Haicheng. dies typically are linked to formal employment. However, the patterns revealed in figure 2.1 should be 2.2 Household Demographics interpreted with care. The employment status of the respondents as recorded in the survey may be highly The average age of the respondents is 48.9 years old, sensitive to the timing of the interviews because the the average household size 2.75 (table 2.7). The major- employed members of the households may not have been ity of respondents belong to the Han (93 percent) at home if the interviews were conducted in the daytime Table 2.6: housing faciliTies (%) fushun benxi yingkou haicheng gongchangling overall Cold tap water 100.00 99.49 95.33 99.21 99.20 98.49 Hot tap water 2.02 4.23 1.43 34.78 1.60 6.67 Indoor hot water heater 40.81 19.15 32.38 49.80 12.80 29.88 Source: Liaoning province medium-size cities household heating survey, June 2007. Table 2.5: housing insulaTion conDiTions (%) fushun benxi yingkou haicheng gongchangling overall Double pane window 89.95 74.50 86.49 97.14 60.80 81.66 Insulated doors 78.45 59.70 86.41 53.36 38.80 66.65 Insulated windows 80.86 59.23 84.68 41.27 38.00 64.94 Source: Liaoning province medium-size cities household heating survey, June 2007. 14 China: Social Analysis of Heating Reforms in Liaoning Province Table 2.7: householD Demographics fushun benxi yingkou haicheng gongchangling overall Average age 53.60 49.00 46.50 47.40 47.40 48.90 Household size 2.79 2.69 2.84 2.81 2.62 2.75 Ethnicity (%) Han 92.68 92.22 91.02 94.78 99.20 93.22 Man 5.81 7.28 6.53 5.22 0.40 5.67 Others 1.52 0.51 2.44 0.00 0.40 1.12 Marital status (%) Single 26.25 25.08 26.09 22.46 21.61 24.86 Married 63.46 69.24 70.50 75.69 70.02 69.28 Divorced 4.06 2.94 1.48 0.92 3.18 2.49 Widowed 6.23 2.74 1.93 0.92 5.19 3.37 Source: Liaoning province medium-size cities household heating survey, June 2007. Table 2.8: eDucaTion level of responDenTs (%) fushun benxi yingkou haicheng gongchangling overall Illiterate 2.62 2.00 2.38 1.76 2.68 2.25 Primary 11.07 14.11 13.53 11.02 12.75 12.80 High school 65.92 72.39 69.67 74.12 78.69 71.31 College and above 20.19 11.51 14.35 11.34 5.87 13.33 Source: Liaoning province medium-size cities household heating survey, June 2007. figure 2.1: employmenT sTaTus of The responDenTs Total 45 16 16 23 Employed Gongchang 57 4 20 19 Doing odd job Unemployed Retired Haicheng 69 7 7 17 Yingkou 48 17 17 19 Benxi 37 22 17 24 Fushun 32 18 14 35 0 20 40 60 80 100 Percent Source: Liaoning province medium-size cities household heating survey, June 2007. Household Characteristics 15 Table 2.9: number of employeD persons in The householDs (%) fushun benxi yingkou haicheng gongchangling Total 0 53 45 40 26 36 42 1 27 33 24 14 35 28 2 18 18 32 58 29 27 3 and above 2 4 4 2 1 3 Source: Liaoning province medium-size cities household heating survey, June 2007. Table 2.10: householD income (rmb) fushun benxi yingkou haicheng gongchangling overall Total income of family last year 20,851 20,294 22,131 19,674 17,316 20,421 Standard deviation 15,556 14,045 14,371 11,859 758 13,670 Source: Liaoning province medium-size cities household heating survey, June 2007. during weekdays. This could have resulted in a situation Any potential changes in pricing brought about by heat- where interviews were conducted only with unemployed ing reform may mean that the scope and scale of public members in households that also had employed mem- assistance programs will need to be reconsidered. bers. Table 2.9 presents arguably more accurate infor- mation by reporting the number of employed household For the purpose of analysis, the households were members in the surveyed households. About 42 percent divided into five groups based on income level (figure of households do not have a single member who has 2.2). There are sizable disparities in income across the formal employment. These households may be in need sample. The average annual income for the bottom 20 of some form of government subsidy to deal with the potential financial burden arising from heating reform. Table 2.11: DisTribuTion of income sources 2.3 Household Income percentage of income sources total income The average annual income of the households in the Salary 75.62 sample was 20,421 RMB (table 2.10). Although the dif- Pension 20.61 ference in average income across the five cities is rela- Other regular income 3.27 tively small (ranging from 17,316 to 22,131 RMB), there are sizable variations in income distribution within these Investment income 0.17 cities, as seen from the standard deviation. Income is Other income 0.08 more evenly distributed in Haicheng and Gongchangling Bonus 0.07 compared to the other three cities. Rental income 0.07 Remittance 0.04 The major sources of household income are salary and pension (table 2.11). Public assistance programs, such Minimum living standard allowances 0.06 as minimum living standard allowances, unemployment Other public aid 0.01 compensation, and other public aid comprise only a very Unemployment compensation 0.00 small share of the total income for the sampled house- holds overall, indicating that both the amount and cov- Source: Liaoning province medium-size cities household heating survey, June 2007. erage of public assistance programs are quite limited. 16 China: Social Analysis of Heating Reforms in Liaoning Province Table 2.12: DisTribuTion of Dibaohu (%) fushun benxi yingkou haicheng gongchangling overall Is your household a government designated-low income family? Yes 12.37 20.03 14.46 10.63 16.80 15.51 No 87.63 79.97 85.54 89.37 83.20 84.49 On which criterion was your household designated as low-income family? Laid off/unemployed 39.53 56.59 25.81 44.44 28.57 42.90 Health condition 13.95 10.08 17.74 18.52 16.67 13.86 Disability 27.91 17.05 37.10 7.41 45.24 25.74 Old age 6.98 15.50 12.90 14.81 2.38 11.88 Other 11.63 0.78 6.45 14.81 7.14 5.61 Source: Liaoning province medium-size cities household heating survey, June 2007. percent of the households is 6,301 RMB, or less than 2.12). Among the respondents of the five cities in Lia- one-seventh of the average annual income for the top 20 oning, approximately 15 percent of the households are percent of the households. Due to uneven distribution of government designated dibaohu. Attention needs to be income, sufficient attention must be paid to the potential paid to ensure that such designation results in assistance impact of heating reform on the bottom 20 percent of for those in the community who require it most. the households. In fact, the amount of public assistance received by The limited resources for public assistance programs dibaohu is quite small. Table 2.13 shows that on average, are mainly allocated to households that have been des- ignated by the government as dibaohu. The main criteria for determining qualification for public assistance pro- grams is whether the person has been laid off/unem- Table 2.13: income profile of Dibaohu ployed, or suffers from poor health and disability (table non-Dibaohu Dibaohu figure 2.2: income, by QuinTile Average annual income (RMB) 22,570 8,783 Income sources (%) 50 Salary 75.78 71.58 45 4,362 Pension 20.75 16.82 40 Other regular income 3.06 8.81 35 Bonus 0.07 0.05 Y (thousands) 30 Investment income 0.15 0.52 2,566 25 Rental income 0.07 0.06 20 1,964 Unemployment compensation 0.00 0.01 1,535 15 Minimum living standard 0.00 1.56 10 allowances 630 5 Other public aid 0.00 0.18 0 Remittance 0.03 0.40 1st quintile 2nd quintile 3rd quintile 4th quintile 5th quintile Other income 0.09 0.00 Source: Liaoning province medium-size cities household heating Source: Liaoning province medium-size cities household heating survey, June 2007. survey, June 2007. Household Characteristics 17 the income from various public assistance programs accounts for less than 2 percent of annual income even figure 2.3: The poor anD The near-poor for dibaohu, while the average income of dibaohu is less than 40 percent of non-dibaohu. 10 9 8,783 While the priority of public assistance programs among 8 the surveyed households is given to dibaohu, as 7,261 expected, more attention should also be paid to the needs 7 (thousands) of the near-poor households who do not receive public 6 assistance. Figure 2.3 shows the comparison between 5 dibaohu and the bottom 20 percent of households who 4 are not dibaohu. It suggests that some of the benefits 3 for dibaohu may not be well targeted and that the poor 2 households that do not qualify for dibaohu benefits may 1 actually face more hardship than dibaohu. 0 Dibaohu 1st quintile (excluding Dibaohu) Source: Liaoning province medium-size cities household heating survey, June 2007. 3 Household Energy Usage: Consumption and Expenditure 3.1 Energy Sources by Purpose This section focuses on the energy sources used by households for cooking, heating water, and space heat- ing (heating space in a room or a home). The use of heat- ing systems will be discussed in the next section. Electricity is the most frequently used energy source in household cooking (table 3.1). Only 8 percent of house- holds do not use electricity for cooking; about 70 percent of households report that at least half of their cooking energy comes from electricity. A significant number of households use LPG or gas as cooking fuel. The three main energy sources for heating water are electricity, gas, and LPG. About 44 percent of house- holds mainly use electricity (at least half) for heating water. While about 34 percent of households mainly use a centralized heating system in the heating season, they gas to satisfy their water heating needs, only about 10 supplement it with electric appliances when the tem- percent of households use coal as the energy source for perature is low. heating water, suggesting that coal, for this purpose at least, has been replaced by cleaner fuels in the five cities More detailed analysis on space heating provided by included in the survey. heating systems will be presented in the next section. The majority of households do not use electricity, gas, or coal for space heating because they are connected 3.2 Appliances and Usage to some type of heating system. However, about 40 percent of households use electricity, and 10 percent Table 3.2 shows the average number of appliances used use coal for space heating. These households either do by households in the sample. Significantly, the major- not have access to heating systems, or use alternative ity of households (75 percent) use at least one electric energy sources to supplement heating systems when blanket during the winter season. Other commonly used the services provided by heating systems are not sat- appliances include electric heaters (26 percent), electric isfactory. For example, in group discussions in Fushun, water heaters (24 percent), gas stoves (31 percent), and some citizens indicated that although they have and use LPG stoves (47 percent). 19 20 China: Social Analysis of Heating Reforms in Liaoning Province 3.3 Energy Expenditure Table 3.1: energy sources for cooking, heaTing waTer, anD space heaTing (%) On average, households spend about 116 RMB per month on energy, excluding expenses on heating sys- electricity gas lpg coal tems in households connected to such systems (table Cooking 3.3). The largest share is consumed by electricity (about None 8 72 47 89 58 RMB), followed by LPG (28 RMB), and coal (19 RMB). Since some of the energy expenditure is used for space Only a little 6 1 8 2 heating, household energy expenditure should decrease Less than half 18 2 12 1 as the need for space heating is met by more efficient About half 39 19 21 3 centralized heating systems. More than half 9 2 9 2 All/almost all 21 4 4 4 Household energy expenditure represents a significant share of income for the poor. Table 3.4 shows that, Heating Water while the richest households (the 5th quintile) spend None 30 66 51 88 only about 5 percent on energy, the poorest households Only a little 12 0 10 2 (1st quintile) have to allocate 24 percent of their income Less than half 14 0 11 1 to energy use. While this is a surprisingly large figure About half 26 13 17 2 that suggests that expenses for heating systems have not been adequately accounted for, it also indicates that More than half 5 1 6 2 heating reform may have a significant positive impact on All/almost all 13 20 5 5 the welfare of poor households. Space Heating None 57 -- -- 89 Therefore, heating reform needs to strike a balance: a Only a little 18 -- -- 0 positive impact must be achieved on the welfare of poor households without inadvertently creating a counter, Less than half 4 -- -- 0 adverse affect on another group. About half 4 -- -- 2 More than half 2 -- -- 2 All/almost all 15 -- -- 7 Source: Liaoning province medium-size cities household heating survey, June 2007. Note: -- = Not available. Table 3.2: use of energy appliances % of households that number of hours per day for number of hours per day appliance own the appliance cooking/heating water for space heating Electric heater 26 -- 3.1 Electric blanket 75 -- 4.1 Electric stove 3 1.8 -- Electric water heater 24 4.1 -- Gas stove 31 2.5 -- LPG stove 47 2.0 -- Gas water heater 13 2.2 -- Coal stove 12 5.5 8.9 Source: Liaoning province medium-size cities household heating survey, June 2007. Note: -- = Not available. Household Energy Usage: Consumption and Expenditure 21 Table 3.3: Difference in elecTriciTy expenDiTure Table 3.4: energy expenDiTure by QuinTile monthly expenditure rmb energy expenditure as % Electricity 57.8 of total income Gas 11.8 Dibaohu 24.0 LPG 27.5 1st quintile 24.0 2nd quintile 8.3 Coal 18.6 3rd quintile 6.1 Others 0.6 4th quintile 5.0 Total 116.3 5th quintile 4.8 Source: Liaoning province medium-size cities household heating survey, June 2007. Source: Liaoning province medium-size cities household heating survey, June 2007. 4 Space Heating: Quality, Consumption, Billing, and Payment 4.1 Access to Heating Systems About 84 percent of households in the sample are con- nected to some type of heating system (table 4.1). In Fushun and Benxi, the coverage of households with heating systems is 95 percent and 91 percent respec- tively, whereas in Gongchangling, roughly two-thirds of households are connected. Table 4.1 also shows that access to heating systems var- ies across income groups. The poorest households (1st quintile) and dibaohu are less likely to have access to heating systems than wealthier households (except for dibaohu in Fushun). sample in Haicheng or Gongchangling has access to such The majority of households in the sample are connected systems. Given that this is not a simple random sample, to small boiler houses; only about 32 percent of house- the actual percentage of households connected to cen- holds are connected to centralized heating systems (table tralized heating systems is likely to be even smaller. 4.2). There are sizable variations across the five cities-- while more than half of the households in Fushun are Most of the newer residential buildings have had small connected to centralized systems, no household in the boiler heating systems installed that are similar to the Table 4.1: access To heaTing sysTem, by ciTy anD income (%) fushun benxi yingkou haicheng gongchangling overall Dibaohu 98 82 70 74 36 75 1st quintile 93 81 67 58 31 72 2nd quintile 93 90 82 90 78 87 3rd quintile 100 100 83 100 70 92 4th quintile 96 98 73 94 72 87 5th quintile 95 97 71 91 82 86 Total 94 91 75 85 68 84 Source: Liaoning province medium-size cities household heating survey, June 2007. 23 24 China: Social Analysis of Heating Reforms in Liaoning Province Table 4.2: Type of heaTing sysTem, by ciTy (%) fushun benxi yingkou haicheng gongchangling Total Centralized heating system 53.1 46.0 19.7 0.0 0.0 31.7 Small boiler house in the 41.6 46.7 73.4 96.8 99.4 62.7 residential district Small boiler run by work unit 4.0 5.5 6.4 3.2 0.6 4.6 Small boiler located in the building 0.5 1.7 0.6 0.0 0.0 0.8 Others 0.8 0.2 0.0 0.0 0.0 0.2 Source: Liaoning province medium-size cities household heating survey, June 2007. Table 4.3: Type of heaTing sysTem, by builDing vinTage (%) before 1980 1980­1989 1990­2000 after 2000 Total Centralized heating system 32.4 35.2 28.5 31.7 31.0 Small boiler house in the residential district 61.1 59.2 66.1 63.0 63.5 Small boiler run by work unit 6.5 4.9 4.2 4.3 4.5 Small boiler located in the building 0.0 0.2 1.0 1.0 0.7 Others 0.0 0.5 0.3 0.0 0.3 Total 100.0 100.0 100.0 100.0 100.0 Source: Liaoning province medium-size cities household heating survey, June 2007. older ones (table 4.3); as a result, there are no appre- figure 4.1: heaTing fuel for householDs noT ciable differences in buildings that have been built at dif- connecTeD To a heaTing sysTem ferent times. Among the 16 percent of households that are not con- Others nected to any heating systems, 68 percent use coal and 2% Nothing 16 percent use electricity for space heating (figure 4.1). 12% The widespread use of coal for space heating among Coal stove households not connected to any heating systems sug- Air conditioner 2% 45% gests that the use of coal stoves for heating might still be a major source of pollution problems in these cities. In group discussions in Yingkou, an example was given of an Electric heater individual whose building had no heating supply system 16% and had an indoor temperature between 15 and 16° C. As a result, a coal stove was used for warmth. During the 2006­07 heating season, the individual's stove con- sumed two tons of coal at a total cost of approximately 1,400 RMB. Coal stove and self-installed radiator 23% 4.2 Quality of Heating Services The vast majority of households surveyed are not sat- Source: Liaoning province medium-size cities household heating isfied with the service quality of the heating systems survey, June 2007. to which they are connected (table 4.4). About half of Space Heating: Quality, Consumption, Billing, and Payment 25 Table 4.4: level of saTisfacTion wiTh heaTing conDiTions (%) very very unsatisfied unsatisfied neutral satisfied satisfied For households connected to functional heating systems Are you satisfied with the temperature? 13 38 35 13 1 Are you satisfied with the amount of heat you receive every 11 42 34 13 1 day in terms of heating hours per day? Are you satisfied with the reliability of the heating supply, 9 30 44 18 0 i.e., the number of normal heating days? Are you satisfied with the noise level from the operation 5 16 47 31 1 of the heating system? Are you satisfied with the quality of heating supply in 13 35 38 13 1 general? For households not connected with functional heating systems Are you satisfied with heating conditions of your house? 7 20 57 15 1 Source: Liaoning province medium-size cities household heating survey, June 2007. households reported being either "very unsatisfied" or felt "very unsatisfied" and "unsatisfied," while a signifi- "unsatisfied" with the quality of heating service over- cantly higher percentage (75 percent) of households in all, and only 14 percent of households felt "satisfied" Gongchangling were unhappy with the service quality of or "very satisfied." This widespread dissatisfaction sug- their heating systems. Group discussions also indicated gests that improvements resulting from heating reform that it was common to experience periods when heat projects should benefit from very strong public support. was not available and that it was invariably lacking at the Households are especially concerned with the low tem- beginning and end of the heating season. perature and the limited number of heating hours per day. Interestingly, households that are not connected to In addition to their satisfaction level with heating ser- a heating system are more satisfied with their heating vices, households were asked about room temperature conditions than are connected households. at various times during the day in March. It is clear that the room temperature for most households connected The level of household satisfaction varies from city to to heating systems is below 16° C throughout the day city (table 4.5). In Yingkou, 38 percent of households (table 4.6) and although heating increases during the Table 4.5: level of saTisfacTion, by ciTy (%) fushun benxi yingkou haicheng gongchangling Very unsatisfied 11 8 5 25 39 Unsatisfied 36 35 33 38 36 Neutral 34 49 35 30 25 Satisfied 19 8 24 6 0 Very satisfied 0 0 3 1 0 Total 100 100 100 100 100 Source: Liaoning province medium-size cities household heating survey, June 2007. 26 China: Social Analysis of Heating Reforms in Liaoning Province Table 4.6: heaTing conDiTion, by ciTy (%) fushun benxi yingkou haicheng gongchangling Total (%) (%) (%) (%) (%) (%) 6:00 a.m.­10:00 a.m. Below 10 3.0 32.0 1.0 3.0 49.0 16.0 10­16 65.0 46.0 32.0 67.0 48.0 50.0 Above 16 32.0 22.0 67.0 30.0 3.0 34.0 10:00 a.m.­6:00 p.m. Below 10 6.0 28.0 12.0 3.0 39.0 17.0 10­16 63.0 45.0 29.0 68.0 60.0 49.0 Above 16 31.0 28.0 59.0 30.0 1.0 34.0 6:00 p.m.­12:00 a.m. Below 10 5.0 26.0 1.0 2.0 23.0 13.0 10­16 65.0 52.0 31.0 63.0 68.0 52.0 Above 16 30.0 22.0 68.0 35.0 10.0 35.0 12:00 a.m.­6:00 a.m. Below 10 10.0 36.0 13.0 2.0 57.0 22.0 10­16 72.0 40.0 41.0 69.0 43.0 51.0 Above 16 19.0 24.0 46.0 28.0 0.0 27.0 The lowest indoor temperature 13.1 11.6 15.3 14.2 9.7 13.0 in March (°C) Number of days in March at the lowest 12.1 8.3 7.9 7.9 19.5 9.8 temperature Source: Liaoning province medium-size cities household heating survey, June 2007. evening (from 6:00 PM to 12:00 AM), the improvement In group discussions in Fushun, some households is only marginal. Again, heating service quality is worst in reported that the indoor temperature is at times only Gongchangling among the five cities: the lowest indoor 6­7° C and, in addition, the provision of heating is often temperature in March was on average less than 10° C interrupted for repairs. Another common complaint was and households reported that they experienced 20 days that the amount of time during the day when heating is per a month of this temperature. available is too short. In Haicheng, citizens said that the average indoor temperature is only about 12­13° C, and Not surprisingly, many respondents felt cold during the even then, the heating is intermittent. In Benxi, some heating season. About 63 percent of all households communities reported that when repairs were necessary, reported being either "cold" or "too cold"; 97 percent the provision of heat could sometimes be interrupted for of Gongchangling households said the same. About half as long as four or five days. During winter, the heating of the respondents reported the indoor temperature is could be unavailable for a total of 15 days. either "always" or "often" "cold" or "too cold." In Gongchangling, group discussions indicated strong The above findings are consistent with the results of dissatisfaction with the current heating provisions (table qualitative research. Participants in focus group discus- 4.7). There were many instances. In Quanyang, a com- sions frequently mentioned that the indoor temperature munity of miners' families, citizens stated that heating is for households connected to heating systems was not up provided for only three hours in the morning and three to standard and subject to frequent service disruptions. hours in the evening, which did not provide sufficient Space Heating: Quality, Consumption, Billing, and Payment 27 Table 4.7: QualiTy of heaTing service (%) fushun benxi yingkou haicheng gongchangling Total How is the indoor temperature of your household after receiving heating services? Too cold 11 10 4 5 40 11 Cold 48 52 43 76 57 52 Comfortable 38 31 52 19 2 33 Hot 1 0 1 0 0 0 Too hot 0 0 0 0 0 0 Others 2 7 1 0 1 3 How often was it "too cold" or "cold" in your housing unit in the 2006­07 heating seaason? Always 12 9 2 8 40 11 Often 37 37 25 57 41 37 Sometimes 29 33 32 20 18 29 Rarely 13 20 30 15 0 18 Never 9 2 11 0 1 5 Source: Liaoning province medium-size cities household heating survey, June 2007. heat, and as a result the lowest indoor temperature was reported that household members caught colds when about 11° C. the indoor temperature is "cold" or "too cold." Citizens in Anping community stated that heating was of very poor quality and that in the past season there was no 4.3 Billing for Heating Services heating for more than two months. When available, heat- ing was provided only twice a day, and the highest and The majority of households overall have neither formal the lowest indoor temperatures were 16° C and 9­11° C, nor verbal contracts with heating service providers (table respectively. They claimed that heating often will not be 4.8). However, there are significant variations across the provided even if heating fees are paid. five cities. Ninety percent of households in Haicheng have formal contracts with their heating service pro- Consumers in Gongchangling indicated that as a result viders while only 1 percent of households in Benxi and of problems such as these, it was often necessary to Gongchangling have such an arrangement. Households use additional methods to keep warm, which resulted are typically informed of their heating bill through written in increased expenditure on electricity. The households' notice, but some households (14 percent) never receive main strategies for coping with inadequate heating ser- heating bills from their service provider. The majority of vices include using electric blankets, wearing more win- households (78 percent) receive a heating bill once for ter clothes, going to bed early, and using electric heaters the entire heating season. Haicheng is again an excep- (figure 4.2). Participants in group discussions noted that tion, as 44 percent of households are billed or informed not only was the use of supplemental electricity for heat- monthly during the heating season. ing expensive, adding as much as 100 to 200 RMB extra during the heating season, but it also caused dryness in In group discussions in Yingkou, where heating fees the indoor air. are usually paid once at the start of the heating sea- son, it was suggested that heating fees instead be paid Beyond the issue of discomfort, another consequence monthly to reduce the financial burden on impoverished of inadequate heating services may be negative health households. impacts on households. Some 73 percent of respondents 28 China: Social Analysis of Heating Reforms in Liaoning Province figure 4.2: householDs' coping sTraTegies for Dealing wiTh inaDeQuaTe heaTing service Using electric blanket 73 Wearing more winter clothes 72 Going to bed early 34 Using electric heater 30 Using air conditioner 7 Weather stripping 6 Enhancing exterior insulation 4 Replacing windows 2 Using coal stove 1 0 10 20 30 40 50 60 70 80 Percent Source: Liaoning province medium-size cities household heating survey, June 2007. Table 4.8: billing sysTems, by ciTy (%) fushun benxi yingkou haicheng gongchangling Total Do you have formal contract with heating service provider? Yes 19 1 12 90 1 19 No 81 99 88 10 99 82 Do you have verbal contract with heating service provider? Yes 4 5 56 23 1 18 No 96 95 44 77 99 82 How are you informed to pay the heating bill? Written notice 77 80 95 79 87 82 Verbal message from the heating service provider 6 2 2 3 0 3 Never receive any notice 16 18 3 18 8 14 Others 1 1 0 1 5 1 How often are you informed to pay the heating bill? Once for the whole heating season 87 72 97 42 87 78 Billed or informed monthly for 12 months 2 6 1 4 0 3 Billed or informed during the heating season 1 5 1 44 0 8 Never received any notice 9 18 1 4 10 10 Others 1 0 0 6 3 1 Source: Liaoning province medium-size cities household heating survey, June 2007. Space Heating: Quality, Consumption, Billing, and Payment 29 4.4 Heating Subsidies: Coverage percent, respectively) that are connected to heating sys- and Amount tems receive some level of heating subsidies. About half of households in the sample receive some Among households that receive heating subsidies, 80 level of heating subsidies (table 4.9). However, heating percent obtain them from the employer of one household subsidies are closely related to access to heating sys- member, while about 17 percent obtain them through tems; only 12 percent of households without access to public assistance programs for low-income families (table heating systems receive any heating subsidies. Again, 4.10). In 69 percent of households, heating subsidies are substantial variations exist across the five cities. In Hai- directly transferred from subsidy providers to heating cheng, only 9 percent of households receive heating service providers, while 20 percent of households pay subsidies and most households pay 100 percent of their the heating bills upfront and are then reimbursed by their heating bills. In Fushun, Benxi, and Gongchangling, the employers. In Yingkou, Haicheng, and Gongchangling, a majority of households (62 percent, 82 percent, and 71 significant number of households (23 percent, 16 percent, Table 4.9: percenTage of householDs wiTh heaTing subsiDies, by ciTy (%) fushun benxi yingkou haicheng gongchangling Total For households connected to heating systems Yes 62 81 21 10 71 54 No 38 19 79 90 29 46 For households not connected to heating systems Yes 5 24 2 0 28 12 No 95 76 98 100 72 88 For all households Yes 59 76 17 9 57 47 No 41 24 83 92 43 53 Source: Liaoning province medium-size cities household heating survey, June 2007. Table 4.10: percenTage of householDs wiTh heaTing subsiDies (%) fushun benxi yingkou haicheng gongchangling Total Sources of heating subsidies Work unit of one household member 76 82 58 25 99 80 Work units of more than one household member 4 1 5 10 1 2 Government subsidies for low-income families 17 17 31 65 1 17 Subsidies given by heating service providers 1 0 2 0 0 0 Others 3 0 4 0 0 1 The ways in which heating subsidies are obtained Allowance (subsidies) transferred directly to heating 41 86 41 74 83 69 service providers Cash allowance (subsidies) given to the households 1 3 23 16 17 7 The household will pay first and get reimbursed from 55 6 27 5 1 20 working unit Others 3 5 8 5 0 4 Source: Liaoning province medium-size cities household heating survey, June 2007. 30 China: Social Analysis of Heating Reforms in Liaoning Province Table 4.11: average subsiDy mechanism anD subsiDy amounT (%) subsidy mechanism subsidy amount (yuan) Allowance (subsidies) transferred directly to the account of the heating enterprises 861 Cash allowance (subsidies) given directly to the household 426 The household will first pay the heating fee by himself and then go to the work unit for reimbursement 1,347 Source: Liaoning province medium-size cities household heating survey, June 2007. and 17 percent, respectively) receive heating subsidies who pay first and are reimbursed later can potentially directly from the employers of household members and obtain 1,347 RMB. This significant disparity suggests then pay heating service providers. However, overall that some employers may reduce their financial obliga- only 7 percent of households receive heating subsidies tions for heating subsidies when they give the subsidies directly. Some retirees expressed their preference that directly to employees in the form of a cash allowance. the subsidy for the heating fees be paid directly into their pension accounts as they believe this method would be Another indication that employers may be trying to both more reliable and convenient. reduce their heating subsidy obligation is apparent in a comparison of the subsidies received against the per- It is noticeable that subsidy amounts tend to be smaller centage of subsidies that should be given (table 4.12). when subsidies are given directly to households com- On average, households receive 77 percent of the subsi- pared to other ways in which subsidies are obtained dies to which they are entitled. In Gongchangling, house- (table 4.11). Households that receive subsidies directly holds responding to the survey obtain less than one-third receive on average only 426 RMB, while households of the amount they should receive. Table 4.12: average percenTage of subsiDy receiveD (%) ratio fushun benxi yingkou haicheng gongchangling overall Amount of subsidy that should be given 1,350 1,196 1,038 567 1,326 1,221 Actual amount of subsidy received 1,070 929 1,034 427 404 945 % received 79 78 100 75 30 77 Source: Liaoning province medium-size cities household heating survey, June 2007. Table 4.13: amounT of heaTing bill, by ciTy (rmb) mean standard deviation minimum maximum Fushun 1,366 532 240 3,888 Benxi 1,313 506 370 3,880 Yingkou 1,647 490 350 3,688 Haicheng 1,446 368 660 2,800 Gongchangling 1,617 430 900 2,860 Total 1,437 507 240 3,888 Source: Liaoning province medium-size cities household heating survey, June 2007. Space Heating: Quality, Consumption, Billing, and Payment 31 4.5 Payment for Heating Services of heating systems seem to be relatively low. Again, the difference across heating service providers within each While the amount of subsidies received by households type of heating system plays a more important role in varies significantly across the five cities, there is less determining the size of heating bills than the difference variation in heating bills. Table 4.13 shows that average across various types of heating systems. heating bills range from 1,313 RMB in Benxi to 1,617 RMB in Gongchangling, with 1,437 RMB as the mean. Based on survey results, nonpayment does not appear However, there are sizable variations within each city. For to be a widespread problem (table 4.15). On average, example, the lowest heating bill in Fushun is 240 RMB; households pay 95 percent of their heating bills, and 89 the highest is 3,888 RMB. Some of the differences can percent of households pay 100 percent. However, cau- be accounted for by the difference in the size of housing tion should be exercised in interpreting such findings. It units, as heating bills are typically charged based on unit is not unreasonable that respondents might have simply size. However, price differentials across heating service overstated their actual payment. providers may also play an important role in determining heating bills. Heating subsidies cover only a portion of the heating bills; on average households in the sample pay 62 percent Small boiler houses in residential districts charge about of heating bills themselves. In Yingkou and Haicheng, 15 percent more than centralized heating systems (table out-of-pocket payment accounts for more than 90 per- 4.14), but, overall, the heating bills across different types cent of heating costs--households in these cities will Table 4.14: amounT of heaTing bill, by Type of heaTing sysTem (rmb) (%) mean standard deviation minimum maximum Centralized heating system 1293 437 240 3880 Small boiler house in the residential district 1525 526 350 3888 Small boiler run by work unit 1282 405 760 2900 Small boiler located in the building 1350 487 850 2700 Total 1437 507 240 3888 Source: Liaoning province medium-size cities household heating survey, June 2007. Table 4.15: amounT of paymenT of heaTing bills, by ciTy (rmb) ratio fushun benxi yingkou haicheng gongchangling overall Heating bill 1369 1308 1650 1449 1624 1437 Actual payment 1325 1200 1603 1364 1624 1365 Actual payment as percentage of 97 92 97 94 100 95 heating bill (%) Percentage of out-of-pocket (unsubsidized) 49 30 93 97 48 62 payment (%) Pay less than 50% of heating bill 4 9 4 1 0 5 Pay less than 100% but greater than 50% 3 2 1 26 0 6 Pay 100% of heating bill 92 89 94 73 100 89 Source: Liaoning province medium-size cities household heating survey, June 2007. 32 China: Social Analysis of Heating Reforms in Liaoning Province Table 4.16: amounT of HeaTing bill Paid (%), by TyPe of HeaTing SySTem and SubSidy Pay less than 50% of bill Pay more than 50% Pay 100% of bill Households without heating subsidies 2 7 91 Allowance subsidies transferred directly to heating 12 4 84 service providers Cash allowance subsidies given directly to household 0 10 90 Household pays first, then reimbursed from work unit 5 5 89 Centralized heating system 5 2 93 Small boiler house in residential district 5 7 88 Small boiler run by work unit 10 3 87 Small boiler located in building 20 0 80 Source: Liaoning province medium-size cities household heating survey, June 2007. be very sensitive to any price changes associated with allowance paid 100 percent of their bills, and almost no heating reforms. household receiving such a direct allowance paid less than 50 percent of its bills. Contrary to the notion that households might direct their heating subsidies toward other uses if the subsi- Among the households not paying 100 percent of their dies are paid directly to them, nonpayment is not higher heating bills, 28 percent were unable to pay their bills for households that receive cash subsidies for heating in full because of financial difficulties, and 24 percent (table 4.16). Ninety percent of households receiving cash refused to pay in full because they were not satisfied with the quality of service (figure 4.3). Most respondents believe that service will be terminated figure 4.3: reaSonS for noT Paying by their heating service provider if heating bills are not 100 PercenT of THe HeaTing bill paid in full, and very few households are convinced that nothing would happen if they failed to pay in full. These 30 28 beliefs may explain why the level of payment remains high despite widespread dissatisfaction with the quality 25 24 of service. 20 Poor households spend a significant portion of their income on heating. Table 4.17 shows that on average, Percent heating alone (including heating subsidies) demands more 15 14 than 20 percent of the annual income for households in the first quintile (the poorest). Even if the portion of the 10 heating bills accounted for by subsidies is excluded, the out-of-pocket payment for poor households for heating 5 still stands at about 10 percent of the household's annual income. Interestingly, while the share of heating bills 0 as a percentage of income is the same for dibaohu and We were Work units of Unsatisfied unable to pay the households with service households in the first quintile, the share of out-of-pocket due to financial were unable quality payment on heating is actually lower for dibaohu than for difficulties to pay households in the first quartile. This strongly suggests, as noted previously, that the "near-poor" might in real terms be in a worse condition than the dibaohu because Source: Liaoning province medium-size cities household heating they are not entitled to the same level of subsidies as survey, June 2007. low-income families. Space Heating: Quality, Consumption, Billing, and Payment 33 figure 4.4: perceiveD conseQuences if heaTing bill is noT paiD in full Total 77.37 6.35 16.27 Service will be stopped Gongchangling 79.49 0 20.51 by service provider Nothing will happen Do not know Haicheng 59.47 3.68 36.84 Yingkou 77.65 5.0 17.35 Benxi 79.2 12.02 8.78 Fushun 84.07 118 14.75 0 20 40 60 80 100 Percent Source: Liaoning province medium-size cities household heating survey, June 2007. As a result of the cost of heating, some households that are connected to a heating supply choose not use Table 4.17: ouT-of-pockeT expenDiTure, by QuinTile it. These households tend to use electric blankets or electric heaters to provide heating. In group discussions out-of-pocket expenditure heating bill as for heating systems as in Yingkou, an individual from the Xinxing community % of total income % of total income of Ba Yuquan did not use central heating for two years Dibaohu 20.6 6.5 but instead used an electric heater to provide warmth. His electricity bill for heating was between 500 and 600 1st quintile 22.8 10.0 RMB per heating season, compared to the 1,000 RMB it 2nd quintile 9.3 5.8 would cost to use the central heating system. 3rd quintile 7.1 3.8 4th quintile 6.1 3.7 It is worth noting that a recurring theme throughout the 5th quintile 4.2 2.4 group discussions is concern over the possible adverse effect on impoverished families of possible price changes Source: Liaoning province medium-size cities household heating associated with heating reforms. survey, June 2007. 5 Heating Reform: Perception, Preference, and Willingness to Pay 5.1 Awareness of Heating Reform The Liaoning provincial government has been imple- menting heating reforms over the past several years. Initiatives include replacing small boiler houses with cen- tralized heating systems, changing from "invisible sub- sidies" (indirect subsidies) to "visible subsidies" (direct subsidies), and shifting from space-based billing to con- sumption-based billing. More than half of the respondents overall were not aware of these ongoing reform initiatives; in Yingkou and Haicheng, about 70 percent of respondents had never heard about heating reform. Among the respondents who are aware of heating reform, the main sources of information are TV and newspaper (34 percent), commu- nity employees (29 percent), and relatives, friends, col- leagues, neighbors, and so on (28 percent). However, the source of information varies significantly across the five cities (table 5.1). 5.2 Replacing Small Boiler Houses with Centralized Heating Systems Although conclusive data are not yet available to show the potential impact of improved heating systems from One of the main components of the Liaoning Third project implementation, some preliminary information Medium Cities Infrastructure Project (LMC3) is to replace indicates that most households welcome changes that small boiler houses with centralized heating systems. It will be brought about by the project, and that these is expected that the project will have a large positive local changes will have a positive impact on the air quality in environmental impact, especially in city centers. This is the project areas. expected to encourage, in turn, the construction of boiler houses that are farther away from urban concentrations, A major challenge in assessing the impact of replacing taking advantage of advanced piping insulation technolo- the small boiler houses is a lack of information about the gies used widely in similar systems worldwide. centralized heating systems that will replace them. It is 35 36 China: Social Analysis of Heating Reforms in Liaoning Province Table 5.1: awareness of heaTing reform (%) fushun benxi yingkou haicheng gongchangling Total Have you heard about heating reform? Yes 48 50 28 31 61 43 No 52 50 72 69 39 57 How did you learn about heating reform? TV and newspaper 74 34 27 5 7 34 Heating service provider 3 4 2 26 0 5 Government officials 2 1 11 0 2 3 The employees of the community 5 20 55 1 72 30 Relatives, friends, colleagues, neighbors, 17 41 5 66 18 28 and so on Others 0 0 0 1 0 0 Source: Liaoning province medium-size cities household heating survey, June 2007. potentially misleading to compare current centralized To be consistent with the description of the improved heating systems with small boiler houses because the systems in the survey, households who report having centralized systems may contain the same operational an indoor temperature above 16° C for 24 hours and are deficiencies as small boiler houses. Therefore attention connected to centralized systems are selected/desig- needs to be paid to the quality of centralized heating sys- nated as a group with "quality" centralized heating sys- tems to ensure that it is superior to the small boilers that tems. They are then compared with other households. they replace. Table 5.2 indicates that there are substantial differences Table 5.2: general saTisfacTion level: "QualiTy" cenTral heaTing sysTem anD small boiler (%) for households connected to quality central heating systems other households very very very very unsatisfied unsatisfied neutral satisfied satisfied unsatisfied unsatisfied neutral satisfied satisfied Are you satisfied with 1 18 52 28 1 14 39 34 12 1 the temperature? Are you satisfied with the amount of heat you receive every day in 0 5 51 43 1 11 44 33 11 1 terms of heating hours per days? Are you satisfied with the reliability of the heating supply, i.e., 0 3 45 51 1 9 31 44 15 0 the number of normal heating days? Are you satisfied with noise level from the 0 14 7 61 9 5 16 49 29 1 operation of the heat- ing system? Are you satisfied with the quality of heating 0 6 0 34 0 14 37 36 12 1 supply in general? Source: Liaoning province medium-size cities household heating survey, June 2007. Heating Reform: Perception, Preference, and Willingness to Pay 37 between the two groups. Significantly fewer households with quality centralized heating systems felt "very unsat- figure 5.1: air QualiTy anD cenTralizeD isfied" or "unsatisfied" about various aspects of heating heaTing sysTems services than other households, although conversely, the level of general satisfaction is noticeably low. However, Air quality has the actual improvement in household satisfaction level improved significantly 17% should be even greater because other aspects of poten- tial improvements arising from project implementation No change 45% have not been accounted for in this comparison. Evidence of the potential impact on air quality can be obtained by examining the responses of households that have already shifted from small boiler houses to central- ized heating systems. In figure 5.1, 17 percent of such households believe air quality in the surrounding areas Air quality has has improved significantly, while 38 percent of house- improved somewhat holds believe that air quality has improved somewhat. 38% Source: Liaoning province medium-size cities household heating survey, June 2007. 5.3 Willingness to Pay for Improved Services The majority of households surveyed indicated that figure 5.2: willingness To pay for they are willing to pay for improved services on the improveD heaTing services assumption that the level of heating subsidies remains unchanged (figure 5.2). Not sure 10% Yes Households' WTP for improved services might be deter- 75% mined by household income level, access to heating No 15% subsidies, level of satisfaction with existing systems, and the use of central heating systems. Table 5.3 shows that households with low income, households without heating subsidies, households without access to heat- ing systems, and households unsatisfied with their exist- ing heating condition are more likely to say "no" or "not sure" regarding WTP. The relationship between the level of satisfaction with current heating condition and WTP may appear counter- Source: Liaoning province medium-size cities household heating intuitive, as it might be expected that households that survey, June 2007. are unsatisfied would be more enthusiastic about the potential improvement of the heating system. There are two issues that might explain this result. The first is that households unsatisfied with their current systems may variables are the factors mentioned above, plus city doubt that the changes will ever be implemented. The dummy variables to control for potential variations across second is that many households are concerned about localities. The results are consistent with the findings heating fees and consequently are reluctant to show earlier: Household income level positively affects WTP their support if they believe heating fees would change. for improved services and availability of household sub- sidies and connection to a heating system result in an Table 5.4 shows the results of a logit model for WTP for increase in WTP. The coefficient on Haicheng shows improved services. The dependent variable is WTP, a that residents there are more willing to pay for improved dummy variable indicating whether or not respondents heating services than residents of other cities, a result are willing to pay for improved services. The independent consistent with the poor service quality in Haicheng. 38 China: Social Analysis of Heating Reforms in Liaoning Province Table 5.3: willingness To pay for improveD services (%) yes (%) no (%) not sure (%) Income Level Dibaohu 60 26 14 1st quintile 64 24 12 2nd quintile 75 14 11 3rd quintile 79 6 15 4th quintile 81 11 8 5th quintile 77 15 7 Heating subsidies Households with subsidies 82 12 6 Households without subsidies 69 18 14 Current heating condition Households connected to heating systems 78 14 9 Households not connected to heating systems 61 22 17 Level of satisfaction with current heating condition Very unsatisfied 74 11 15 Unsatisfied 77 13 11 Neutral 71 20 9 Satisfied 83 8 9 Very satisfied 100 0 0 Source: Liaoning province medium-size cities household heating survey, June 2007. Table 5.4: logiT moDel of wTp for improveD sysTems coefficient std. err. z Income 0.00 0.000 4.78 Heating subsidy 0.66 0.140 4.73 Access to heating system 0.67 0.160 4.32 Heating condition 0.22 0.060 3.66 Fushun -0.83 0.230 -3.58 Benxi -1.14 0.210 -5.29 Yingkou -1.48 0.220 -6.59 Haicheng 0.60 0.310 1.92 Constant 0.11 0.240 0.46 Number of observations 1,871.000 Pseudo R2 0.095 Source: Liaoning province medium-size cities household heating survey, June 2007. Heating Reform: Perception, Preference, and Willingness to Pay 39 Table 5.5: percepTion of shifTing from inDirecT To DirecT subsiDies (%) fushun benxi yingkou haicheng gongchangling overall Good idea 70.66 63.53 44.99 43.43 60.80 57.43 Bad idea 7.91 9.59 0.82 0.80 4.40 5.29 Indifferent 21.43 26.88 54.19 55.78 34.80 37.28 Source: Liaoning province medium-size cities household heating survey, June 2007. In Benxi and Haicheng, some citizens in discussion groups said they would be willing to accept an increase Table 5.6: percepTion of shifTing from inDirecT in heating prices if there were enough accompanying To DirecT subsiDies anD subsiDy improvement in heating quality that it would reach the amounT (%) set standard. Under those circumstances, they said that they would be willing to accept an increase of 100­200 perception heating subsidies (rmb) RMB per heating season. Good idea 1030 Bad idea 736 Does not matter 754 5.4 Indirect to Direct Subsidies Source: Liaoning province medium-size cities household heating Another major initiative in heating reform is the transition survey, June 2007. from indirect to direct subsidies, thereby making house- holds responsible for paying the heating bills. More than half of respondents (57.43 percent) embrace Figure 5.3 shows that only 47 percent households among such change (table 5.5). However, a significant number dibaohu consider subsidies reform a good idea--lowest of households express indifference to this reform initia- among all income groups. tive, an attitude especially pronounced in Yingkou and Haicheng. Reservations about direct subsidies are shared by focus group participants. Employees of financially troubled In contrast, in Benxi group discussions, consumers' reac- companies, workers from companies experiencing tran- tion to and understanding of proposed reform measures, sition from public to private ownership, and people who such as payment and pricing reform, are mostly positive. have lost their jobs through forced early retirement do The majority of citizens are eager to see a change from not believe that they can benefit from the shift from indi- "invisible" to "visible" subsidies. They believe this is a rect to direct subsidies because their employers will not good way to retain some element of leverage or control be able to offer them cash allowances for heating. over the heating company. For example, in group discussions in Fushun, while resi- More effort must be made to provide households in the dents were mostly in favor of the change from an indi- project areas with enough information on this initiative. rect to direct subsidy, it was reiterated that employees of Part of the success of reform policies will depend on bankrupt enterprises, enterprises in transition, and laid- public awareness and positive perception--accordingly, off workers are unlikely to benefit from this method as attention needs to be paid to informing and educating their work places would be unable to pay. consumers and the public on the advantages of changes in billing and subsidies. Some citizens in Benxi also drew attention to the situa- tion where employment continued, but due to a variety of Households with a favorable opinion of direct subsi- circumstances, income was very low. These often would dies tend to be those that receive larger subsidies than not be considered households with a minimum living households who express negative or indifferent views allowance--they would still be required to pay heating (table 5.6). bills without receiving government subsidy. Consumers 40 China: Social Analysis of Heating Reforms in Liaoning Province figure 5.3: percepTions of DirecT subsiDies by income level 5th quintile 59 2 39 Good idea 4th quintile 66 3 31 Does not matter Bad idea 3rd quintile 73 3 23 2nd quintile 56 6 38 1st quintile 46 10 44 DIBAOHU 47 42 11 0 20 40 60 80 100 Percent Source: Liaoning province medium-size cities household heating survey, June 2007. in this situation indicate that they are very unsatisfied In Fushun and elsewhere, a number of citizens agreed with the current charging treatment and strongly oppose that consumption-based billing is fair and reasonable. any increase in heating fees as they often have to borrow However, they expressed caution that they will disagree or perform menial work to pay for heating fees. with this method if heating costs increase. The heating service providers also express some reser- In interviews in Haicheng, technical personnel felt that vation about the shift to direct subsidies, albeit for dif- while consumption-based billing is generally supported ferent reasons. Their concern is that some households by most consumers, the meter used must be of high may simply use the cash allowance that is intended for quality and not subject to tampering. They believed heating for other purposes and not pay their heating ser- that the cost of such meters is high--unaffordable by vice providers. most users. If consumption-based billing is to be imple- mented, the cost of meter installation should be shared by government, heating providers, and users. 5.5 Consumption-Based Billing Behavioral changes are expected in households if consump- Households are enthusiastic about consumption-based tion-based billing is implemented (table 5.8). Indeed, about billing: 94 percent of respondents overall support the 91 percent of households reported that they would switch change (table 5.7); in group discussions in Yingkou, off their radiator when nobody was home and about a substantial number indicated that they are willing to 82 percent of households report that they would lower accept this form of billing as reasonable, scientific, and the indoor temperature after all household members likely to solve reduce inconsistencies between charged go to bed. These findings suggest that potentially sub- and actual consumption--making heating fees fairer and stantial energy can be saved by shifting to consumption- more accurate. based billing. Table 5.7: percenTage of householDs supporTing consumpTion-baseD billing (%) fushun benxi yingkou haicheng gongchangling overall Support 93.01 97.60 90.00 98.31 92.00 94.06 Do not support 6.99 2.40 10.00 1.69 8.00 5.94 Source: Liaoning province medium-size cities household heating survey, June 2007. Heating Reform: Perception, Preference, and Willingness to Pay 41 Table 5.8: householD behavior change unDer consumpTion-baseD billing sysTem (%) fushun benxi yingkou haicheng gongchangling overall Switch off the radiator when nobody is 89.35 90.63 95.28 79.58 98.80 91.23 at home Lower the indoor temperature after the 81.77 71.31 92.39 71.93 93.20 81.57 family goes to bed Source: Liaoning province medium-size cities household heating survey, June 2007. Qualitative research found heating service providers less believed it could be tested in some places, such as new keen to move to consumption-based billing. Represen- areas of a city, but would encounter technical difficulties tatives from heating companies cited inaccurate meters if introduced in older areas. and uncooperative consumers as reasons why any move to consumption-based billing should proceed with cau- tion. They also believed that consumption-based billing 5.6 Payment Mechanisms will reduce their profit margins, and are concerned that poor water quality may damage the meters. Finally, they While households currently typically make one-time pay- also cited concerns that the use of meters may intro- ment for the entire heating season, the majority would duce new technical and implementation problems, such prefer to make payment in installments over a longer as meter tampering. period (table 5.9). In Benxi, as many as 90 percent of households would prefer to pay heating bills on a monthly In Fushun, heating providers said that changing to con- basis during the heating season. In Gongchangling, one- sumption-based billing will be beneficial to citizens but quarter of households would choose to pay their heating cannot be implemented at present. They cited problems bills monthly during the entire year if offered the option. involving inaccurate of meters and uncooperative users when a similar approach was tested in Tianjin. Interestingly, the main reason why households would prefer to spread payment over a longer period is not, In Benxi, heating providers also agreed that consump- as could be expected, for household budgetary rea- tion-based billing requires substantial preparatory work sons. Instead, the majority of respondents are in favor and will be realized only in three to five years. of the initiative because it could help improve heating supply quality (figure 5.4). Households believe that they Heating services administrators also contend that while could increase their ability to press service providers for consumption-based billing should be a long-term tar- improved quality if they pay the heating fees over time get, it cannot be implemented throughout the city. They instead of all at once. figure 5.4: reasons for paying heaTing bills over longer perioD of Time To improve the heating supply quality 56 To allocate household budget better 28 To make the heating bill more affordable 15 0 10 20 30 40 50 60 Percent Source: Liaoning province medium-size cities household heating survey, June 2007. 42 China: Social Analysis of Heating Reforms in Liaoning Province Table 5.9: accepTance of paying bill over longer Time perioD, by ciTy (%) fushun benxi yingkou haicheng gongchangling overall Make a one-time payment before the start 38 9 20 41 32 25 of the heating season Pay the heating bills monthly during the 51 83 67 45 42 63 heating season Pay the heating bills monthly during the 9 7 12 14 24 11 entire year Others 2 0 1 1 2 1 Source: Liaoning province medium-size cities household heating survey, June 2007. 6 Monitoring Social Risks 6.1 Potential Risks There are several potential risks in implementing heating reforms. These all represent areas requiring attention in future project design and policy dialogue. First, interviews with service providers suggest that there might be pressure to increase heating fees for improved services. Many service providers argue that the current level of heating fees needs to be increased by 10­20 percent just to sustain the current level of service, irrespective of potentially improved services. This con- cern was particularly pronounced as coal prices spiked in 2008 to record levels. However, heating expenditure already takes a significant portion of household income, especially in low-income families; further price increases might have a significant impact on those households. heating service providers can potentially exploit their mar- Second, shifting from indirect to direct subsidies may ket power. Although many heating service providers are lead to unintended consequences. There is a strong owned by the government, their operations have been perception that households may simply use the cash commercialized. Effective regulatory control needs to be allowances for purposes other than paying their ser- in place to oversee the price and quality of services. It vice providers if there are no mechanisms to deal with is necessary to address the possibility that new central- nonpayment. Employers may also exploit this reform by ized heating may not automatically be better than the old reducing their obligation to provide heating subsidies. boiler houses it is replacing. Therefore, there is a need to The survey indicates that households receiving heating monitor the technical quality and standards of the new subsides in the form of cash receive significantly lower systems. It is evident that the level of general satisfac- subsidies than those receiving indirect subsidies. The tion among consumers connected to "quality" central- survey also shows, however, that households receiving ized heating systems is not high (table 5.2); yet among cash subsidies have higher collection rates. consumers there is an expectation that changing from the small boiler houses will bring an improvement in the Third, replacing small boilers with centralized heating quality of their heating. Clearly, heating providers face a systems will not automatically improve service quality. technical challenge to close the gap between expecta- Due to the monopolistic nature of the heating industry, tion and current satisfaction. 43 44 China: Social Analysis of Heating Reforms in Liaoning Province Fourth, public assistance programs focusing on heating When implementing pricing and billing reform, policy mak- consumption are limited in nature. While dibaohu are ers should take into account the following measures: entitled to a certain level of subsidy toward paying heat- ing bills, the majority of the poor have no public assis- · Ensuring a safety net for the poor, and potentially tance for heating. Many are currently not connected to broadening heating assistance programs to near- any heating system, and there could be a large financial poor households (This will address the potential burden for these households once they are connected to effects of possible changes in subsidies and pricing. such a system. Heating policies designed to encourage These survey findings mean that it is also necessary the poor to use cleaner systems must either increase to reconsider or examine the adequacy and effec- their incomes or reduce their expenditures (through sub- tiveness of current social assistance programs that sidies or investments in efficiency).4 A World Bank study are intended to meet the needs of poor households, on heating strategies found that a 10 percent increase especially the bottom 20 percent of households.) (decrease) in income resulted in an 8 percent increase · Implementing policies to support improved energy (decrease) in energy expenditure for poor people and efficiency in buildings that will also help reduce heat- a 5 percent increase (decrease) for nonpoor people in ing bills and increase comfort without increasing selected countries in East Europe and Central Asia.5 energy use Thus, changes in incomes will also have an impact on · Establishing regulations that clearly define service consumption and expenditure. As noted, changes in pric- standards to create minimum service levels that ing and billing may result in corresponding changes in address consumer concerns about poor heating ser- consumption of energy by users. While this is undoubt- vices quality edly a positive development, it is worth bearing in mind · Benchmarking district heating utilities at the city and that the poorest group of households spends a signifi- provincial levels to help measure and compare utili- cant portion of their income on heating. Any increase in ties' relative success in operating performance and heating costs may be difficult for such a group to con- customer satisfaction tend with. Therefore, reform needs to find a balance · Carefully planning and implementing consumer between having a positive impact on the welfare of the awareness and education to prepare people for poorest and imposing an increased financial burden. This meter-based variations in their costs compared to could be addressed by a) great attention to maximizing others; educating people on how to use heating the cost effectiveness and energy efficiency of new cen- wisely tralized heating systems to reduce pressure on tariffs; · Establishing billing regulations to deal with con- b) continuing commercialization of heating companies sumer disconnections or the turning-off of thermo- to create incentives for efficient operation and customer stats in households to ensure a minimum technical orientation; and c) a well-targeted and expanded heating functioning of heating systems6 subsidy program. · Conducting periodic household surveys to bench- mark household perceptions and inform policy planning. 6.2 Strategies for Dealing with Potential Social Risks When designing projects that aim to extend centralized heating, authorities should take into account the follow- The above potential social risks require careful attention ing factors: from policy makers and the authorities responsible for heating reform and project design. · Replacing small boilers with centralized heating systems is perceived positively by households for various reasons, including expectations that both service quality and environmental conditions will improve. 4. Lampietti, Julian, and A. Meyer. 2003. Coping with the Cold: Heat- ing Strategies for Eastern Europe and Central Asia's Urban Poor. (World Bank Technical Paper). The study showed that energy expen- ditures as a share of total expenditures in East Europe ranged from 6. Households may choose to disconnect from the system or turn 2 percent (Tajikistan) to 14 percent (Moldova). However, this should off the thermostat when the owner is an investor or absent for be interpreted carefully as the share of spending varies with fluctuat- extended periods. From a technical standpoint, a minimum flow of ing energy prices and household incomes. heating (heated water) through unoccupied housing units is required 5. Lampietti, Julian, and A. Meyer. 2003. Coping with the Cold: Heat- to keep the system functioning. Therefore, heating providers argue ing Strategies for Eastern Europe and Central Asia's Urban Poor. that households should be levied some minimum amount even if (World Bank Technical Paper). they choose to disconnect or turn off thermostats. Heating Reform: Perception, Preference, and Willingness to Pay 45 · Generally, households are willing to pay for improve- groups such as low-income families and households suf- ments, especially those that improve the level of fering from unemployment. They, like low-income fami- service. A high percentage of people use supple- lies, may need government subsidies to cope with the mental forms of heating for cold rooms, and, as they possibility of new financial burdens or how the govern- are already paying more for heating than their heat- ment defines low-income families. Another issue that ing bills, will be willing to pay more for improved ser- needs to be considered is the situation of households vices that eliminate or reduce the need for spending that are immediately above dibaohu. Though ranked on supplemental heating. higher, this group is often worse off than dibaohu in · The impact on consumption patterns of the shift to terms of income because it is not eligible for assistance. centralized heating must be considered. The survey findings indicate that if heating quality is improved, The following steps should be taken to strengthen the consumers would reduce their use of supplemental monitoring mechanism: power and use centralized heating as their primary, if not sole, source of heating. The findings also sug- · Ensure that the public is aware of and understands gest the that heating costs might decline as the proposed heating reforms and their possible conse- efficiency of centralized heating improves and that quences. Survey findings indicate that public aware- a move to consumption-based billing would make ness and understanding are limited and that there is users more energy-conscious and perhaps result in a need, and a potential benefit, to educate the pub- reduced consumption. lic, especially in the areas of changes to billing and · Projects should invest in technologies that enable subsidies. downstream heating reforms and provide techni- · Establish the monitoring and evaluation institution. It cal assistance to companies to help them become should be composed of experts and representatives more professional and responsive to consumers' from government and consumers; be independent demands for improved service. of government; and should report to the public. · Set quantitative and qualitative monitoring indica- tors for such areas as satisfaction level with the 6.3 Monitoring Social Risks heating systems, pricing, and billing; percentage of household income spent on heating services; and An adequate mechanism needs to be established to level of public assistance programs aimed at heating monitor the potential risks cited in this report. The moni- consumption. toring mechanism is a continuous assessment of the · Involve the local communities in monitoring. The project's social impacts of over a long period of time. active involvement and contribution of local com- munities is a crucial element in efforts to monitor The focus of the monitoring mechanism is to under- both the implementation of projects and the conse- stand how various social groups are affected by heating quences of reform. reforms. Specific attention should be paid to vulnerable Appendix A: Survey Questionnaire 47 48 Appendix A: Survey Questionnaire Appendix A: Survey Questionnaire Questionnaire for Liaoning Household Heating Survey Household ID_______________________ Name of city__________________________ ____________ Name of community__________________________ Name of district__________ Name of Enumerator________________ Date_______________Month_______Day __________ . 20002000 35­40. (Read) My name is __________, and I am one of the working personnel for Liaoning household heating questionnaire survey. We are currently conducting a research project for the World Bank on the heating condition of urban residents in Liaoning province. Liaoning province has implemented several heating system reforms in recent year. The government is now planning to borrow from the World Bank to improve the heating supply condition by replacing small boilers with modern central heating supply. This research will be directed by Liaoning Academy of Social Sciences, and will provide essential information and data to the World Bank and the local government on the design and implementation of heating system reform to improve the heating supply condition in Liaoning province. Is the head of the household at home? We are interviewing 2,000 households such as yours within the whole province of Liaoning. All of the 2,000 households are randomly selected. Although your participation is voluntary, we hope that you can participate in this important study of the current heating condition. Your identity and all your answers will be kept strictly confidential. The survey will take about 35­40 minutes. Are you willing to be interviewed? Appendix A: Survey Questionaire 49 If the interview continues ____________:____________ Starting Time____________:____________ Section 1: Housing Condition 1. What type of house you are now living? 1) Apartment in a building with elevator 2) Apartment in a building without elevator 3) Apartment in one-storey building --------- 3 Skip to Question 3 4) House (detached house or townhouse) ------------------------------------------------------- 3 Skip to Question 3 5) Slum housing unit ------------------ 3 Skip to Question 3 6) __________Others, please indicate__________ 2. __________ How many floors are there are there in the building you live in? __________ 2.1 __________Which floor is your room in? __________ 3. Do you own or rent this housing unit? 1) Own 2) Rent ------------------------------------------- 5 Skip to Question 5 3) __________Others__________ ----------- 5 Skip to Question 5 4. How do you get this house? 1) Purchased privatized unit from work unit 2) Purchased privatized public housing unit 3) Purchased an affordable (Jingji Shiyong Fang) unit 4) Purchased through resettlement of slums (Peng Hu Qu) 5) Purchased a market-rate unit 6) Inherited 7) Constructed by your family 8) __________Others (specify__________) 50 Appendix A: Survey Questionnaire 5. Constructing time of the building (or house) 1950 1 7 1990­1995 Before 1950 2 1950­1959 8 1996­1999 3 1960­1969 9 2000­2004 2005 4 1970­1979 10 After 2005 5 1980­1985 11 Do not know 6 1986­1989 6. Of what type of material is your building constructed? 1) Brick, Concrete 2) Brick, Stone, Wood 3) Brick, Stone 4) Stone 5) Formed concrete 6) Others__________ 7. __________ How many rooms are there in your house (excludes bathroom, toilet and kitchen, but includes living room)? Number of rooms__________ 8. /__________ Total space of the house/apartment__________ (sq.m.) / I don't know 8.1 (__________ Living space? (refers to bedroom and living room) __________ (sq.m.) / I don't know . 9. Is the window double pane in your household? 1) Yes 2) No Appendix A: Survey Questionaire 51 10. Have you insulated the doors in your housing unit? (Whether the cold wind outside could enter the room, or the hot air inside will permeate through the gate?) 1) Yes 2) No 11. Have you insulated the windows in your housing unit? (Whether the cold wind outside could enter the room, or the hot air inside will permeate through the window?) 1) Yes 2) No 12. How have you insulated your windows? 1) Caulked 2) Sealed with plastic 3) Sealed with cotton or foam 4) Sealed with rubber weather stripper 5) Sealed well, require no other measures 6) __________________Others____________________ 13. Does your house use any of the following facilities: Facilities [1]Yes [2]No 1 Cold tap water 2 Hot tap water 3 Indoor hot water heater 4 Indoor toilet 5 Toilet shared with other units on the same floor 6 Indoor toilet shared by the entire building 7 Toilet outside the building 52 Appendix A: Survey Questionnaire 14. How would you rank the air quality around your community during winter months? 1) Very bad 2) Bad 3) Neutral ---------------------------------------- 16 Skip to Question 16 4) Good --------------------------------------------- 16 Skip to Question 16 5) Very good --------------------------------- 16 Skip to Question 16 15. To what extent would you attribute the poor air quality around your community during winter months to the following factors? [1] Leading factor [2] Affecting factor [3] Has no impact on the air quality 1 Operation of small boilers in the building 2 Operation of small boilers near the building 3 Operation of small boilers far away from your house 4 Use of coal stove for heating purpose 5 Use of industry boilers __________) 6 Others (specify__________) Appendix A: Survey Questionaire 53 Section 2: Household Energy Consumption and Expenditure 16. 3 What portion of the following energy sources did you use for cooking, heating water (for bathing, laundry or dishwashing) and indoor space heating in March this year? 1) None 2) Only a little 3) Less than half 4) About half 5) More than half 6) /All / almost all 7) Do not know A B C ) Indoor space heating (outside Cooking? Heating water? heating supply)? 1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 Electricity (Piped 2 gas) Central gas 3 LPG 4 Kerosene 5 Diesel 6 Coal 7 Others 54 Appendix A: Survey Questionnaire 17. Which of the following devices did you use this winter for heating, cooking and heating water? A B C Typically, how many hours did you use it per day / Do not know C1 C2 Power (kW) / / ) Do not For cooking/ For heating Quantity know heating water? (additional)? Electric 1 XXXXX heater Electric 2 XXXXX blanket (electric mattress) 3 Electric stove Electric water 4 heater /Central 5 XXXXX (Piped) gas stove/cooker /LPG 6 XXXXX gas stove/cooker / 7 XXXXX XXXXX LPG/ gas water heater /Kerosene 8 XXXXX stove/cooker 9 Coal stove XXXXX 10 Others XXXXX 18. 3 How much did your family spend on the following energy sources in March this year? 3 Expenditure in March (RMB Yuan) 1 Electricity __________ Yuan Do not know 2 Central (Piped) gas __________ Yuan Do not know 3 LPG __________ Yuan Do not know 4 Kerosene __________ Yuan Do not know 5 Diesel __________ Yuan Do not know 6 Coal __________ Yuan Do not know 7 Others __________ Yuan Do not know Appendix A: Survey Questionaire 55 19. How much did your household spend on the following energy sources last month? Expenditure Last Month (RMB Yuan) 1 Electricity __________ Yuan Do not know 2 Central (Piped) gas __________ Yuan Do not know 3 LPG __________ Yuan Do not know 4 Coal __________ Yuan Do not know Section 3: Household Heating Condition and Expenditure 20. 2006­2007 Did your household receive any heating allowance (subsidies) for the 2006­2007 heating season? 1) Yes 2) No ------------------------------------------------ 26 Skip to Question 26 21. What is the source of heating allowance (subsidies)? 1) Work unit of one household member 2) Work units of more than one household members 3) Government subsidies for low income families 4) Subsidies given by the Heating enterprises by cutting the price 5) __________Others__________ 22. 2006­2007 __________ How much heating allowance (subsidy) should be given to your household for the 2006­2007 heating season? __________Yuan Do not know 23. 2006­2007 __________ How much heating allowance (subsidy) did your household actually receive in cash for the 2006­2007 heating season? __________Yuan Do not know 56 Appendix A: Survey Questionnaire 24. How did your household get the heating allowance (subsidies)? 1) Allowance (subsidies) transferred directly to the account of the heating enterprises 2) Cash allowance (subsidies) given directly to the household -------------------------------------- 26 Skip to Question 26 3) The household will pay the heating fee by himself firstly, and then go to the work unit for reimbursement ------------------------------------------------------- 26 Skip to Question 26 4) __________Others (please specify__________) ------------------------------------------------------- 26 Skip to Question 26 25. 2006-- 2007 __________ To the best of your knowledge, how much heating allowance (subsidies) for your household was transferred directly to the account of the heating enterprises? __________Yuan Do not know 26. "" Is your house connected to any functioning heating system (The heating system must function in a normal condition. A system should be considered as "workable", even if residents are not satisfied with the service provided by this heating system.) 1) Yes 2) No ------------------------------------------------ 57 Skip to Question 57 27. Were the heating pipes in your housing unit (building) reconstructed under the horizontal pipe reconstruction program (Separation of heating pipes (i.e. heating supply is controlled in the form of one household one valve))? 1) Yes 2) No ------------------------------------------------ 29 Skip to Question 29 28. Are you satisfied with the horizontal pipe reconstruction program? 1) Very satisfied 2) Satisfied 3) Neutral 4) Unsatisfied 5) Very unsatisfied Appendix A: Survey Questionaire 57 29. What type of heating system is your house connected to? 1) Centralized heating system 2) Small boiler house in the residential district ------------------------------------------------------- 33 Skip to Question 33 3) Small boiler run by work unit ------------------------------------------------------- 33 Skip to Question 33 4) Small boiler located in the building ------------------------------------------------------- 33 Skip to Question 33 5) __________Others (specify __________) 30. __________ When did your family start to use centralized heating system? __________ (year) Do not know 31. What type of heating system did your family use before connected to the centralized heating system? 1) Small boiler house 2) Small boiler run by work unit 3) Small boiler located in the building 4) __________Others (specify __________) 32. Have you noticed any change in the air quality around your community since connecting to the centralized heating system? 1) Air quality has improved significantly 2) Air quality has improved somewhat 3) No change 4) __________Others__________ 33. 2006­2007 How many days per month in average is the heating system on in the 2006­2007 heating season? How many hours per day? A __________ How many days each month averagely is the heating supplied? __________ Do not know 58 Appendix A: Survey Questionnaire B __________ How many hours each day averagely is the heating supplied? __________ Do not know 34. Do you have formal contract on heating service with your service provider? 1) Yes 2) No ------------------------------------------------ 36 Skip to Question 36 3) Do not know ------------------------------ 36 Skip to Question 36 35. Does the contract specify the responsibilities of the provider and the user in terms of service quality and payment? 1) No 2) Yes 3) Yes, but the responsibilities of the user only 4) Yes, but the responsibilities of the provider only 36. Do you have verbal agreement on heating service with your service provider? 1) Yes 2) No ------------------------------------------------ 38 Skip to Question 38 3) Do not know ------------------------------ 38 Skip to Question 38 37. Does the verbal agreement specify the responsibilities of the provider and the user in terms of service quality and payment? 1) No 2) Yes 3) Yes, but the responsibilities of the user only 4) Yes, but the responsibilities of the provider only 38. 100% Do you need to pay any heating fee (including the situation that households receive 100% heating subsidies directly from work unit, and then pay the money to the heating service provider)? 1) Yes ----------------------------------------------- 40 Skip to Question 40 2) No 3) Do not know ------------------------------ 40 Skip to Question 40 Appendix A: Survey Questionaire 59 39. Why not? 1) Heating fee is paid by the owners of the house ------------------------------------------------------- 48 Skip to Question 48 2) 100%Heating fee is already 100% paid by my work unit -------------------------------------------------- 48 Skip to Question 48 3) 100%Government covers 100% of the heating fee ------------------------------------------------------- 48 Skip to Question 48 4) __________ Others__________ ---------- 48 Skip to Question 48 40. 2006­2007 __________ How much should you pay for the 2006­2007 heating season totally? __________Yuan Do not know 41. 2006--2007 __________ How much did you actually pay? (Including all the subsidies)? __________Yuan Do not know In it 41.1 __________ How much was paid in the form of work unit or government allowance (subsidies)? __________Yuan Do not know 41.2 __________ How much was paid from your own pocket? __________Yuan Do not know 42. [100%] [For households not paying 100% of their heating bills] Why not? [1]Yes [2] No 1 We were unable to pay due to financial difficulties 2 Work units of the family members were unable to pay 3 Unsatisfied with the service quality __________) 4 Others (specify__________) 5 Do not know 60 Appendix A: Survey Questionnaire 43. 2006­2007 To the best of your knowledge, about how many households in your building (community) didn't pay their heating bills in full for the 2006­2007 heating season? 1) Overwhelming majority 2) Most of them 3) About a half 4) A small part 5) Very few 6) Do not know 44. What will happen when the heating bill is not paid in full? 1) Nothing will happen 2) Service will be stopped by the provider 3) Do not know 4) __________Others__________ 45. How are you informed to pay your heating bill? 1) Written notice 2) Verbal message from the heating service provider 3) Never received any notice, pay the heating fee on your own initiative 4) __________Others__________ 46. How often are you informed to pay your heating fee? 1) Once for the whole heating season 2) 12Billed or informed monthly for 12 months 3) Billed or informed monthly during the heating season 4) never received any notice 5) __________Others__________ 47. How do you pay your heating bill? 1) Pay to the collector 2) Go to heating service provider to pay 3) Pay through bank account transaction 4) __________Others__________ Appendix A: Survey Questionaire 61 48. Do you have temperature-control device for your radiator? 1) No 2) Yes 49. 3 What was the average indoor temperature of your house in March this year? 1) 6:00­10:00__________ From 6:00 am to 10:00 am__________ Do not know 2) 10:00­6:00__________ From 10:00 am to 6:00 pm__________ Do not know 3) 6:00­12:00__________ From 6:00 pm to 12:00 pm__________ Do not know 4) 12:00­6:00__________ From 12:00 pm to 6:00 am__________ Do not know 50. How do you think of the indoor temperature of your house after heating supply? 1) Too cold 2) Cold 3) Comfortable 4) Hot 5) /Too hot / need to open the windows 6) __________Others (please specify__________) 51. 3 __________ What was the lowest indoor temperature of your house in March? __________ Do not know 52. 3 __________ How many days in March did you have this lowest temperature? __________ Do not know 62 Appendix A: Survey Questionnaire 53. 2006­2007"""" How often did it happen to be "too cold" or "cold" in your housing unit in the 2006­2007 heating season? 1) Always 2) Often 3) Sometimes 4) Rarely 5) Never ----------------------------------------- 56 Skip to Question 56 54. """" What did you do when it's "too cold" or "cold"? (The answer is not unique, so choose all the suittable items.) 1) Weather stripping 2) Replace windows 3) Exterior insulation addition 4) Wear more winter clothes 5) Use electric heater 6) Use coal stove 7) Use air conditioner 8) Go to bed early 9) Use electric blanket 10) __________Others__________ 55. 2006­2007"""" Did members of your household suffer from the following condition when the indoor temperature was "too cold" or "cold" during the 2006­2007 heating season? 1) Get cold [1]Yes [2]No 2) Have frostbite in hands and feet [1]Yes [2]No 3) __________ Other diseases caused by cold indoor temperature (specify__________) [1]Yes [2]No Appendix A: Survey Questionaire 63 56. : Level of satisfaction with the heating service: Very Very Unsatisfied Unsatisfied Neutral Satisfied Satisfied A Are you satisfied with the heating [1] [2] [3] [4] [5] fee? B Are you satisfied with the payment [1] [2] [3] [4] [5] arrangement for heating supply? C Are you satisfied with the [1] [2] [3] [4] [5] temperature? D Are you satisfied with the amount [1] [2] [3] [4] [5] of heat you receive every day in terms of heating hours per day? E Are you satisfied with the reliability [1] [2] [3] [4] [5] of the heating supply, i.e., the number of normal heating days? F Are you satisfied with noise degree [1] [2] [3] [4] [5] from the operation of the heating system (if relevant)? G [1] [2] [3] [4] [5] In general, are you satisfied with the quality of the heating supply? Skip to Section 4 57­65 Questions 57­65 are for households not connected to any heating system 64 Appendix A: Survey Questionnaire 57. What do you use for indoor space heating? 1) Coal stove 2) Coal stove and radiator installed by oneself 3) Electric heater 4) Gas heater 5) Air conditioner 6) Nothing --------------------------------------- 60 Skip to Question 60 7) ____________Others______________ 58. 2006­2007 How many days per month did you heat your housing unit in the 2006­2007 heating season? How many hours per day to be heated? A __________ How many days each month? __________ Do not know B __________ How many hours each day__________ Do not know 59. 3__________ How many rooms in your house were heated in March this year__________ 60. 3 What is the average indoor temperature of your house in March? A __________ Temperature of the rooms heated? __________ Do not know B __________ Temperature of the rooms not heated__________ Do not know 61. """" How often did it happen to be "too cold" or "cold" in your housing unit? 1) Always 2) Often 3) Sometimes 4) Rarely 5) Never ----------------------------------------- 64 Skip to Question 64 Appendix A: Survey Questionaire 65 62. """" What did you do when it's "too cold" or "cold"? (The answer is not unique, so choose all the suittable items.) 1) Weather stripping 2) Replace windows 3) Exterior insulation addition 4) Wear more winter clothes 5) Use electric heater 6) Use coal stove 7) Use air conditioner 8) Go to bed early 9) Use electric blanket 10) __________Others__________ 63. 2006­2007"""" Did members of your household suffer from the following condition when the indoor temperature is "too cold" or "cold" during the 2006­2007 heating season? (The answer is not unique, so choose all the suittable items.) 1) Got cold 2) Have frostbite in hands and feet 3) __________ Other diseases caused by cold indoor temperature (specify__________) 64. __________ Approximately how much did you spend on heating last month? __________Yuan Do not know 65. Are you satisfied with the heating condition of your house? 1) Very satisfied 2) Satisfied 3) Neutral 4) Unsatisfied 5) Very unsatisfied 66 Appendix A: Survey Questionnaire Section 4: Knowledge of Heating Reform and WTP for Improved Services Liaoning Province is now implementing heating reforms gradually, such as replacement of small boiler houses with central heating system, change from "invisible subsidies" to "visible subsidies", shift of payment responsibility from work unit to individual household, and consumption based billing system. As a part of the economic reform, the aim of the heating reform is to improve the financial sustainability, quality and reliability of the heating system. 66. Have you heard of the heating reform? 1) Yes 2) No ------------------------------------------------ 68 Skip to question 68 67. How did you learn about the heating reform? 1) TV and newspaper 2) Heating service provider 3) Government officials 4) The employee of the community 5) Relatives, friends , colleagues , neighbors, etc. 6) __________Others__________ WTP scenario: ___ ___ . 24 1618. . You must be unsatisfied with the current heating supply condition in the city of __________as I reckon. Appendix A: Survey Questionaire 67 The heating services of many households are provided by small boilers, characterized by low quality and reliability. In addition, the coal-fired small boiler houses in many parts of the city are also causes of winter air pollution problems. The government of __________is currently considering an investment project to improve the quality and reliability of local heating system. The project will include replacement of small boilers with modern central heating system, renewal of old heating pipes and payment system reform. The implementation of the project will improve the service quality and reliability in your area. The heating service will be provided 24 hours to provide a temperature of between 16 and 18 degree. In addition, the replacement of small boilers will contribute to improve of winter air quality in your area. In order to recover the cost of this investment project, households are expected to pay their heating bills in full for the improved service quality and reliability. 68. Are you willing to pay your heating bill in full for the improvement of heating service and reliability (assuming that the level of heating subsidies remains the same)? 1) Yes ----------------------------------------------- 70 Skip to Question 70 2) No 3) Not sure 69. Why don't you agree or not sure? 1) I am satisfied with the current heating condition 2) Cannot afford it 3) Improving heating supply should be the responsibility of the government 4) __________ Others__________ 70. One of the measures in the heating reform is to shift the responsibility of payment from work unit to household. A typical arrangement is that work unit will give the heating subsidies to the households and then households pay the heating service providers directly. How do you feel about this measure? 1) It is a good idea 2) It is a bad idea 3) It does not matter 68 Appendix A: Survey Questionnaire Another measure considered in the heating reform is consumption based billing. A heating meter will be installed in each household so that the heating consumption can be controlled. Households may adjust the indoor temperature freely and can switch off the radiator at any time. Households will be billed by the actual heating consumption rather than a flat fee for the heating season based on square meters of the heating space. 71. Would you support this measure? 1) Yes 2) No 72. Would you do the following under the consumption based billing? 1) Switch off the radiator when nobody is home [1]Yes [2]No 2) Lower the indoor temperature after the families go to bed [1]Yes [2]No 73. What would you set the indoor temperature in your house under the consumption based billing? 1) 6:00­10:00 __________ From 6:00 am to 10:00 am __________ Do not know 2) 10:00­6:00__________ From 10:00 am to 6:00 pm __________ Do not know 3) 6:00­12:00__________ From 6:00 pm to 12:00 pm __________ Do not know 4) 12:00­6:00__________ From 12:00 pm to 6:00 am __________ Do not know Appendix A: Survey Questionaire 69 74. If you have the choice to pay your heating bill over longer time period instead of paying it once before the start of the heating season, which of the following is your preferred option? 1) Pay the hating bill once and for all before the start of the heating season ------------------- 76 Skip to Question 76 2) Pay the heating bill monthly during the heating season 3) 12Pay the heating bill monthly during the entire year (split into 12 payments) 4) __________ Others__________ 75. Why would you prefer to pay your heating bill over longer time period? 1) To make the heating bill more affordable 2) To allocate household budget better 3) To improve the heating supply quality 4) __________ Others__________ Section 5: Household Socio-economic Condition 76. __________ How old are you? __________ 77. What is your ethnicity? 1) Han 2) Man 3) Korean 4) Mongolian 5) __________Others__________ 78. Is your household government designated low income family (Di Bao Hu)? 1) Yes 2) No ------------------------------------------------ 80 Skip to question 80 70 Appendix A: Survey Questionnaire 79. Based on which criterion was your household designated by the government as low income family? 1) /Laid-off/unemployed 2) Health condition 3) Disability 4) Old age 5) __________ Others (specify__________) 80. What was the total income of your family last month? 500 1 7 5001­6000 500 and below 2 500­1000 8 6001­8000 3 1001­2000 9 8001­10000 4 2001­3000 10 10001­15000 15001 5 3001­4000 11 15001 and above 6 4001­5000 Do not know 81. __________ How many people are there in your family (i.e., family members that live together)? __________ Appendix A: Survey Questionaire 71 82. : Household information (look at the code table below): A B C D E F G Marital Status (see the code month (including business Currently study at school? Other regular income per Employment Status Pension per month 1=2= Salary per month Education Level (1=yes, 2=No) table below) income) Family Members 1 The interviewee 2 3 4 5 6 7 8 9 10 Code Table A C D Marital Status Education Level Employment Status 1S = Single 1 = Primary school 1 = Employee of Government agency 2 = Married 2 = Junior high school 2 = Employee of Government 3 = /Divorced/Separated 3 = High school service/Institutes 4 = Widowed 4 = Technical or 3 = Employee of State-owned enterprises vocational school 4 = Employee of Private-owned 5 = College or enterprises university 5 = 6 = Master's degree or Employee of three-capital enterprises (owned higher by foreigners, overseas Chinese and joint ventures) 7 = illiterate 6 = Private business owners 8 = unknown 7 = Employee of the community 8 = Public welfare post 9 = Doing odd-jobs 10 = Retired 11 = Unemployed (including early retirement) 12 = Doing housework 13 = Have not taken up an occupation 14 = ________Others (specify)________ 72 Appendix A: Survey Questionnaire 83. Other income sources of your family last year A B [1]Yes Amount (RMB) Income Sources [2] No Do not know 1 Bonus 2 Investment Income (including interest income) 3 Rental Income 4 Unemployment Compensation 5 Minimum Allowances 6 Other Public Aid 7 Money (cash) from family members not living in this household and (or) relatives or friends? 8 Other Income 84. __________ The total family expenses last month is __________Yuan. Do not know 85. How much does your family typically spend on the following items? Expenditures (RMB) Item Do not know 1 Food per day 2 Clothes per year 3 Household facilities, articles per month 4 Medicine and medical services per month 5 Transport, post and per month communication services 6 Recreation, education and per year cultural services 7 Living expenses (housing, water, electricity, gas, heating, per month coal, etc.) Articles of everyday use and 8 per month services Appendix A: Survey Questionaire 73 86. Now, I would like to know about other electric and non-electric appliances that your household owns A B If yes, number of Does you household have the following working items? [1]Yes [2]No the unit 1 Black and white TV 2 Colored TV 3 Air conditioner 4 VCR/VCD/DVD VCR/VCD/DVD player 5 Camera 6 Mobile phone 7 Washing machine 8 Sewing machine 9 Refrigerator 10 Bicycle 11 Motorcycle 12 Automobile __________:__________ Ending Time: __________:__________ Section 6: Questions for Enumerators 87. Was the interviewee irritated or nervous during the interview? 1) Yes 2) No 88. Was the interviewee seemed bored or tired during the interview? 1) Yes 2) No 74 Appendix A: Survey Questionnaire 89. Are you certain that the interviewee answered the questions honestly and truly? 1 2 3 4 5 Very uncertain Moderately Neutral Moderately Very certain uncertain certain 90. Who else answered the questions with the interviewee during the interviewee? (The answer is not unique, so choose all the suitable items.) 1) Nobody 2) Spouse 3) Other adult family members 4) Children 5) __________Others (specify__________) 91. Who else was there listening during the interview? (The answer is not unique, so choose all the situtable items.) 1) Nobody 2) Spouse 3) Other adult family members 4) Children 5) __________Others (specify__________) Initial Data Checking Operator: Name_______________________Signature______________________Date___________ Data Entry Operator: Name_______________________Signature______________________Date___________ Final Data Checking Operator: Name_______________________Signature______________________Date___________ The World Bank The World Bank Group Asia Sustainable and Alternative Energy Program 1818 H Street,NW Washington, DC 20433 USA www.worldbank.org/astae