By Bloomberg News November 30, 2011, 11:00 PM EST
Dec. 1 (Bloomberg) -- China, the world’s biggest
energy user, increased electricity prices for the first time in six
months and said it will cap the cost of power-station coal in an attempt
to reduce outages in coming months.
Wholesale rates charged by coal-fired power
plants to distributors, or the on-grid tariff, rose by 0.026 yuan (0.41
cent) a kilowatt-hour, and retail power prices increased by an average
0.03 yuan a kilowatt-hour, effective today, according to a statement on
the National Development and Reform Commission website yesterday. Price
gains for contract thermal coal next year will be limited to less than 5
percent, it said.
The increases may reduce pressure on profit
margins at power plants, encouraging them to boost generation. The
nation faces a shortage of as much as 40 gigawatts in the winter and
spring, the China Electricity Council said Oct. 27. Electricity prices
had been frozen since June as the government focused on fighting
inflation, even as the benchmark domestic coal rose to a three-year high
last month.
“The measures are aimed at easing cost pressure
on utilities and making them generate more electricity,” Dave Dai,
regional head of clean energy and utilities research at Daiwa Capital
Markets Hong Kong Ltd., said by telephone. “But it will only work in the
short term without a long-term solution.”
The government also increased on-grid tariffs
paid to some hydropower and gas-fired power plants, NDRC said in
statements on its website today.
The nation will start so-called progressive power
pricing for residential users after local governments complete
consultations, NDRC said yesterday. Retail power tariffs for 80 percent
of households will remain unchanged under the pricing mechanism, which
aims to charge larger electricity users at higher rates, the NDRC said.
Spot Coal Capped
Spot coal prices will also be limited. Thermal
coal with an energy value of 5,500 kilocalories per kilogram at northern
Chinese ports will be capped at 800 yuan a metric ton starting Jan. 1,
the statement said.
Benchmark prices at Qinhuangdao, the nation’s
largest coal port, rose to as much as 860 yuan a ton on Oct. 23, the
highest level since 2008, as utilities built up stocks to meet winter
demand, according to the China Coal Transport and Distribution
Association. The price was at 840 yuan to 850 yuan on Nov. 27.
Chinese inflation slowed the most in almost three
years in October, giving the government more room to lift electricity
tariffs. Consumer prices rose 5.5 percent, the lowest rate in five
months, compared with 6.1 percent in September, official figures show.
The government last raised retail power prices on
June 1, together with on-grid tariffs for 15 provinces. It allowed some
on-grid adjustments to be backdated to April this year and January
2010.
Record Coal Imports
China is the world’s biggest producer and
consumer of coal. It bought record amounts of the fuel overseas in
September as importers sought cheaper regional supplies. Purchases rose
25 percent from a year earlier to 19.1 million tons, the NDRC said Oct.
20.
“The coal price cap will slow down the nation’s
imports of the fuel as the purchase is most sensitive to prices,” David
Fang, a director at China Coal Transport and Distribution Commission,
said by telephone from Beijing today.
The nation’s power-generating capacity was 960
gigawatts last year, with coal and oil-fired power plants accounting for
73 percent and hydropower dams 22 percent, the National Energy
Administration said in January.
The NDRC also said yesterday that it will double
surcharges on power users to 0.008 yuan a kilowatt hour to subsidize
renewable-energy projects.
--Winnie Zhu. Editors: Paul Gordon, Mike Anderson.
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