CHINA probably won't raise power tariffs in the first half after coal costs jumped, although an increase had been widely expected as a follow-on.
According to Xie Juchen, president of the Zhongneng Power Industry Fuel Co, which represents power companies in negotiations with coal producers, they have yet to submit final data complied for this year's coal prices to the government as some figures need verification.
"This means, probably, we won't see a rise before the first half as approval for a tariff rise could also take time," Xie said on the sidelines of an industry conference yesterday.
Chinese coal producers and their key buyers, domestic power plants, this year have agreed to a cost increase of more than five percent for the long-term contract price, based on initial data, Xie said in January.
A rise of more than five percent means power tariffs could be raised under a cost flow-on mechanism designed by the National Development and Reform Commission, China's top planner.
The mechanism, implemented in May 2005, allows power producers to pass on 70 percent of cost increases if coal prices rise more than five percent on a yearly basis over a six-month period.
Tariffs have been raised twice under the system in May 2005, and June 2006. But the government has also held off lifting tariffs despite the rise in coal prices exceeding the five-percent threshold in late 2005.
Xie pointed out that, last year, they submitted the data to the government in May and the increase was implemented on June 30, indicating that this year's rise, if there is, will be delayed.
Xie declined to say whether China will raise power tariffs from July onward.
An analyst said that, if the government gets the data in June, an increase may be announced in July or August. "According to the mechanism and as the previous moves go, a tariff adjustment should be announced in the middle or the end of a year," the analyst said on condition of anonymity. "But it may also be made in July, or August, who knows?"
Increasing costs in mining rights, safety measures and environmental protection led to higher coal prices this year. China has started to levy a special charge on coal miners in Shanxi Province, its key producing region, in a trial program for sustainable development.