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Government may raise power rates soon

By Zhang Qi (China Daily)
Updated: 2008-09-13 09:59

 

A worker checks power transmission facilities in Huaibei, Anhui province. China may raise retail electricity power prices in the coming months, as inflationary pressure eases, the State Electricity Regulatory Commission (SERC) said. [China Daily]

China may raise retail electricity power prices in the coming months, as inflationary pressure eases, the State Electricity Regulatory Commission (SERC) said.

SERC also said it has submitted a report to the State Council proposing measures for power price reforms and developing a more reasonable pricing formation mechanism.

China's consumer inflation has slowed from 6.3 percent in July to 4.9 percent in August, the lowest level since June last year, giving the government more room to raise power prices.

However, on-grid power prices will not be raised in the short term due to two hikes in the past two months, Zou Yiqiao, director of the department of tariffs and financial regulation under SERC said.

China raised retail prices for non-residential power users by 0.0168 yuan from July while on-grid power supplied by coal-fired plants was raised by 0.025 yuan per kWh.

In August, the government raised the on-grid rates by 0.02 yuan per kWh, but the retail power price remained unchanged.

Shanghai-based Dongfang Securities analyst Zhang Zhonghua said retail power would be raised by 0.025 yuan per kWh.

Raising retail power prices is in line with the on-gird price hike in August, said Zou from SERC.

The 5 percent price hike in on-grid power was expected to relieve power producers that continued to suffer losses caused by soaring coal prices and the government caps on electricity tariffs. The first on-grid tariff change was not enough to compensate power plants' operating losses, analysts said.

But as the government wanted to keep an eye on electricity prices for consumer inflation, the price hike only shifted the loss from power producers to the grid companies.

The hike has caused 4 billion yuan ($584.62 million) power purchase costs per month for the State Grid Corp and China Southern Corp, China Securities Journal reported.

The two grid operators will likely suffer a loss if retail prices are not raised within four months, the newspaper added.

Zou said SERC agreed an appropriate adjustment to the retail price for residential power, but questioned whether it would pass the hearing.

"Electricity bills only stand at a small proportion of residents' daily consumption," Zhang Zhonghua said. "Raising the retail price for residential power is reasonable and feasible."

Li Xinju, an electricity industry analyst from Bohai Securities agreed. He said the continuing sliding consumer inflation has provided a favorable condition for the hike in retail residential power.