CHINA raised prices for electricity used for industrial, commercial and agricultural purposes in 15 provinces and municipalities, the first increase since November 2009, in an attempt to ease a power shortage that threatens to be the worst in history.
 
Prices will increase by 16.7 yuan (US$2.57) per 1,000 kilowatt-hours, or about 3 percent, the country’s top economic planner said yesterday.
 
The National Development and Reform Commission said tariffs will remain unchanged for residential users. Shanghai is not affected.
 
The move is intended to ease regional power shortages, restrain the development of energy-guzzling industries and ensure a steady supply of electricity for residential use, according to the commission.
 
The country’s power shortfall could reach as much as 40 gigawatts this summer, worse than 2004 when the country sweltered through its worst crunch in decades, the State Grid Corp of China said last week.
 
This year’s shortages began as early as March after surging coal prices eroded power generators’ profitability and also due to insufficient generation capacity and transmission problems.
 
Shanxi Province, the country’s leading coal producer, saw the largest price increase. Prices of electricity there rose by 24 yuan per 1,000kwh, compared with a rise of 4 yuan per 1,000kwh in Sichuan Province.
 
Qinghai, Gansu, Jiangxi, Hainan, Shaanxi, Shandong, Hunan, Chongqing, Anhui, Henan, Hubei, Hebei and Guizhou are also affected by the price rises.
 
The commission also raised on-grid tariffs, charged by power generators to distributors, by 20 yuan per 1,000kwh on average, although analysts said the rise was too small to restore profitability of many coal-fired plants. On-grid prices were reportedly already raised in 12 of them since April.
 
"The rise in on-grid prices will provide some relief to power generators while the rise in end-user tariffs will curb demand from industrial energy consumers," said Lin Boqiang, director of the China Center for Energy Economics Research in Xiamen University.
 
China’s five major power groups lost more than 10 billion yuan in their thermal power business in the first four months of this year. Higher on-grid prices will encourage them to spur utilization rates.
 
Coal-fired plants make up more than 80 percent of China’s power generation.
 
Lin said he doesn’t expect the government to raise prices for residential users any time soon on inflation concerns and given the fact households only account for 14 percent of China’s power consumption.
 
Meanwhile, the commission said China’s fuel supplies are set to remain tight in June because of the power shortages and strong seasonal demand.
 
"Though falling crude oil prices on the international markets in May lowered operational costs for refiners? we are not optimistic about domestic fuel supply in the second quarter," it said.
 
The power shortages in some northern, eastern and southern Chinese provinces have boosted demand for diesel, a fuel used to fire independent generators.
 
Diesel inventory stood at 7.7 million tons at the end of March, down 15.2 percent from February, the commission said. Overall oil product inventory declined 8.8 percent to 13.9 million tons.
 
The State Grid has said it will extend the scale of power rationing to industrial users.
 

 
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