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Power prices for industry use to rise
By Fu Jing (China Daily)
Updated: 2004-05-11 01:13

The price of electricity for industrial use is soon to increase.

However, domestic power prices are to stay the same, sources with the National Development and Reform Commission (NDRC) confirmed Monday.

Detailed measures will be unveiled soon, said a commission official, who would make no further comment.

"I can tell you that residential electricity prices will not be increased," he said.

Many residents have predicted that the government would raise the cost of power to regulate electricity use in the wake of shortages that affected 21 of China's provinces last summer.

It has been widely reported that the commission was going to increase electricity prices by an average of 1.4 fen (0.16 US cent) per kilowatt-hour (kwh). The price in China currently averages about half a yuan per unit.

The hike in western and middle regions of the country is expected to be higher than in eastern China.

Power company insiders say the moves have long been on the agenda of the State Electric Power Regulatory Commission and the NDRC, which is responsible for governing prices of daily necessities and dealing with those areas essential to national security.

"They have been considering the price reform of coal and electricity supply for a long time," said Zhang Jianyu, a visiting scholar with Tsinghua University.

A pricing official has been quoted by China Youth Daily as saying that the price of electricity used in agricultural production and the production of chemical fertilizer will remain unchanged.

Industries that are heavy users of electricity will face higher prices for excessive consumption.

The commission will call for hearings before any price adjustment of electricity used in households.

"Most urgent among all of the economic objectives is to cool down industries which use a lot of electricity," said Zhang Jianyu. "This will be a continuing effort to address the problem of over-investment in some sectors."

Amid the government's repeated warnings of over-investment since last summer, some sectors are still awash in money and the enthusiasm of local governments and enterprises shows no signs of cooling.

China's fixed asset investment reached 879.9 billion yuan (US$106 billion) in the first quarter, up 43 per cent over the same period of last year.

Regions and industries are still making rushed investments and indulging in copycat construction which have led to price increases for raw materials, energy and transport.

Investment in steel, electrolytic aluminum and cement soared early this year despite repeated warnings on over-investment.

Meanwhile, the proposed increase is expected to cushion the rising demand for power during the coming summer.

To solve the problem of power shortages, NDRC vice-minister Zhang Guobao said government departments have taken various measures, including redistribution of power supplies in various regions, adjustments to electricity consumption through price controls and the provision of more power plants.

Electricity demand will soar to 2.11 trillion kwh, an increase of 12 per cent compared to 1.89 trillion kwh during 2003.

"Shortages are likely to lessen in 2005," he said.

But Zhang Jianyu said the power shortage was forcing system reforms, and mentioned conflict taking place between power plants and electricity grid companies, as well as between coal mines and power plants.

The scholar said coal prices adjusted according to market demand, but for a long time electricity pricing has been controlled by the government.

Last year, surging coal prices and fixed electricity prices caused losses at many power plants.

"I'm afraid the price hike will not make up for the losses of electricity plants as their prices have not been increased," said Zhang Jianyu. "The hike is only profitable for electricity grid companies.''

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