China's five power generation groups each have submitted applications to the National Development and Reform Commission (NDRC) to hike electricity price in some areas, in an effort to counter rising coal prices, the Beijing Times reported today.
The power giants are China Datang Corporation, China Huaneng Group, China Huadian Corporation, China Power Investment Corporation and China Guodian Corporation.
They expected the NDRC to launch a mechanism to link power price to coal prices in some areas, where coal prices recorded sharp rises, according to Wang Yonggan, secretary general of the China Electricity Council.
In 2005, the Chinese government implemented a mechanism linking coal and power prices. Under the linkage, electricity prices will move in line with coal price increases. If coal prices rise by more than 5 percent in a six-month period, electricity prices will be adjusted by the government.
According to Yang Linjun, secretary general of Fuel Association under the council, the price of coal for power generation increased by 9 percent year on year under the council's calculation and grew 13 percent in light of China National Coal Association's figures.
??Once the linkage starts, electricity prices will increase by 1-2 fen (0.13 to 0.26 US cents) per kilowatt hour,?? Li Chaolin, a coal expert said.
Prices of coal went up sharply in Shanxi Province, Guizhou Province and South China's coastal areas.
In January this year, China Electricity Council had called on the State Council, China's cabinet, to start the linkage mechanism. The cabinet ordered the NDRC to step into the issue, but no policies on power price hike have been issued so far.
Wang also disclosed yesterday that council requested the NDRC pay attention to power prices as Shanxi Province, one of China's biggest coal production bases, has hiked its coal price.
??The suspended decision on energy price is mostly due to surging inflation this year,?? said Zhou Fengqi, an expert at the NDRC's energy research institute.
Statistics show that China's consumer price index (CPI) rose 4.4 percent in June compared with a year earlier, a 33-month high.
In addition to inflation, China is suffering less from lack of electricity and power generation capacities, so the NDRC is unwilling to change the price.
Wang also said that foodstuff and pork have been the most sensitive topics, so another price hike would trigger more public debates.
Once the government launched the linkage mechanism in these key areas, some other provinces would follow with price hikes, according to Wang.
But the electricity council still suggested the government should launch the mechanism in key areas quickly as the power consumption peak time approaches this summer.