NDRC: No power price hike in short term

Updated: 2007-07-26 15:18

China's top economic planning agency said Wednesday that it will not raise electricity price in the near future despite lobbying from State-owned power giants.

"We will continue to watch for a period of time before considering raising electricity prices," Cao Changqing, head of the pricing department of the National Development and Reform Commission (NDRC), told a press conference in Beijing.

Cao said power price hikes last year and better corporate governance of power firms have already reduced their cost and increased profit.

He added coal prices were relatively stable this year and even slightly lower than the beginning of the year.

Cao made the remarks in response to the media reports that China's five major State-owned power groups including China Huaneng Group and China Huadian Corp have appealed to the planner for power price hikes in regions where the coal designated for power plants had recorded the highest price rise.

The appeal aimed to compensate for higher cost as the prices of coal for power companies jumped around nine percent over last year, Wang Yonggan, secretary-general of the China Electricity Council, was quoted as saying by the Beijing Times on Wednesday.

Wang said the council had appealed twice this year to raise electricity prices nationwide, but did not receive approval from the NDRC.

In 2005 China introduced the policy of adjusting power prices when coal prices change over five percent in a six-month period. Coal-fired plants accounted for 78 percent of the nation's total power generating capacity of 600 million kw in 2006, while the clean hydropower accounted for only 20 percent.

"The prices of energy including electricity and oil were relatively lower, but increases in their prices would not come easily as we have to consider the possible impacts on various sectors of the society," said Cao.

Zhou Fengqi, an analyst with the NDRC's energy research institute, said, "The government has delayed energy price hikes because it does not want to push up the already high inflation."

China's consumer price index, the main gauge of inflation, rose 4.4 percent in June over the same month last year, the highest in 33 months and well above the government's target of three percent for 2007.

Analysts also noted that price rises in electricity would help curb the excessive growth of high polluting and energy-consuming industries.

China's energy consumption to generate per unit of gross domestic product fell 1.33 percent last year from the previous year, but the power consumption per unit of GDP rose 2.75 percent.

Industrial output of the sectors, including power, steel, oil refining, chemicals, construction materials and metals, which consumed 70 percent of the nation's energy for industry, grew by 20.1 percent in the first six months, 3.6 percentage points higher than the same period last year.

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