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Step in right direction

(China Daily)
Updated: 2008-09-13 14:02

The suggestion made by the State Electricity Regulatory Commission that tariffs on electricity sold by power grids may be further raised is a commendable step to heighten energy-saving awareness among the public.

The country's falling inflation has surely given policymakers more room to maneuver to introduce power price hikes. But they do not have to take eased inflationary pressure as a prerequisite to boost energy conservation. The urgent need to raise the country's energy efficiency alone justifies more hikes in power tariffs.

It was reported that officials from the electricity regulator said at a news conference on Thursday that the commission had submitted a report to the State Council proposing measures for price reforms and improving the pricing mechanism. The measures include allowing prices to be determined by the market and charging intensive users higher rates.

Less than a month ago, the country raised the on-grid price of power supplied by coal-fired plants by 0.02 yuan per kWh while leaving the retail price unchanged.

The 5 percent hike in electricity tariffs has come as a relief to power producers. Soaring coal prices and government caps on electricity tariffs have much eroded the profit margins of power firms in the first half of this year, prompting them to curtail or even shut production.

More importantly, by passing the surge in coal prices on to consumers, policymakers have driven home a message to the public that they should better prepare for higher prices as soon as possible.

And now, the lower-than-expected consumer inflation in August has paved the way for the authorities to directly hike the cost of electricity for household and industrial use. China's consumer price index fell to 4.9 percent in August from 6.3 percent in July. The indicator was at 7.9 percent in the first half of the year.

Rising consumer inflation early this year understandably made it difficult to introduce power price hikes that would reflect the jump in global energy prices as well as the tight supply at home.

With the country's headline inflation having fallen for four months, it is now the proper time to introduce electricity price hikes, which are necessary to change the energy-consuming lifestyle of individuals and the energy-intensive growth of many enterprises.

The government has made it a top goal to cut the country's energy intensity by 20 percent between 2006 and 2010. In spite of the adoption of a slew of measures to encourage energy-saving efforts by all sections of the society, China is still short of that five-year target.

Policymakers should not hesitate to try a market-driven power pricing system. After all, the country's swelling national coffer has also made it much easier to cushion the poor against such hikes.