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Price of power rises to stop heavy use
By Fu Jing (China Daily)
Updated: 2004-06-16 23:26

Consumers in many parts of China will pay more for electricity after the nation's economic and pricing watchdog increased charges Wednesday.

The National Development and Reform Commission increased prices by an average of 2.2 fen (0.27 US cent) per kilowatt-hour (kWh).

Before Wednesday, the national average was about 0.5 yuan (6 US cent) per kWh.

People and some groups in the country's northern, eastern, southern and central regions are so far the only ones facing prospects of higher costs. But the commission is considering similar rises for the nation's northeastern and northwestern regions .

A commission spokesman said the hikes are mainly aimed at curbing rising power usage, which has caused blackouts in 24 provinces and municipalities over the past several years, and paying for the rising cost of generating electricity.

China is facing a serious power shortage problem this year. Zhejiang, Jiangsu, Shanxi, Guizhou and Sichuan provinces have been among those heavily hit by shortfalls in the past few months.

Chai Songyue, head of the State Electricity Regulatory Commission, said yesterday that shortages during peak times this summer are expected to be as much as 25 million kilowatts.

Grid companies are trying to recoup money after spending more than 700 billion yuan (US$84.3 billion) on national networks since 1998.

But not everyone will be affected by this round of hikes, said the commission spokesman.

Electricity price for agriculture and fertilizer production will remain the same.

All industrial and commercial users will pay more and residential consumers may be hit with higher prices after public hearings have been held by local governments.

Representatives from all walks of life will be invited to participate in the hearings to express their opinions on whether the prices should be raised or not.

"The differential measures are in place to avoid burdening some enterprises and people," Zhang Jianyu, a visiting scholar with Tsinghua University, told China Daily.

Zhang says he hopes this round of price rises will form part of the country's systematic power supply reform.

The complicated reform will resolve many of the problems that occur between power plants and grid companies, as well as between coal mines and power plants.

Zhang said coal prices are adjusted according to market demand but for a long time, power charges have been controlled by the government.

Last year, surging coal prices and fixed electricity prices caused many power plants to lose out.

"The market will have the final say about power prices in the future," Zhang said. "But the reform process will be quite demanding."

Those hardest hit during this round of hikes will be the heaviest power users.

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

Amid the government's repeated warnings about over-investment since last summer, some sectors are still awash with money. And the enthusiasm shown by local governments and enterprises does not look like cooling.

Investment in steel, electrolytic aluminium and cement soared earlier this year despite repeated warnings.

Meanwhile, nine provinces and municipalities including Hebei Province, Beijing and Shanghai will introduce differential seasonal electricity prices to ensure a stable power supply.

In Beijing, prices will increase by 11 per cent during peak times in the third quarter.

An official with the Beijing Municipal Development and Reform Commission said consumers affected by the move should change their habits and reduce their power consumption during peak periods.

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