China hikes power prices and caps steam coal prices

Friday, 02 Dec 2011

It is reported that the National Development and Reform Commission hiked power prices raising non-residential power tariffs by CNY 0.03 per kilowatt hour effective today.

The on-grid tariff for distributors was raised by CNY 0.025 per kWh, while the hike in the on-grid tariff for coal fired power plants was CNY 0.026 per kWh. Though the NDRC released a draft plan for a tiered pricing mechanism for residential power usage, residential power prices will remain unchanged at the moment.

For the 80% of households which will fall under the first tier, the NDRC is proposing unchanged power prices.

According to the draft plan, low income families in both urban and rural areas are to be offered 10 to 15 kWh of free electricity per month. The second tier which is expected to cover 95% of all households will see a slight increase in tariffs while the final tier will have to pay significantly higher prices for electricity.

In addition, the NDRC rolled out a plan to control coal prices to help power generation companies suffering from high coal prices allowing a maximum 5%YoY rise in 2012 contract coal prices for coal produced for own use.

The NDRC imposed a cap on market coal prices with a price ceiling of CNY 800 per ton for 5,500 kilocalories coal at Qinghuangdao Port, Tianjin Port, Jingtang Port, Guotou Jingtang Port, Caofeidian Port, Yingkou Port, Jinzhou Port and Dalian Port. In order to lower the operating costs of coal producers, the NDRC will eliminate various types of charges levied by local governments.

Except for mineral resource compensation fees, and charges for the coal sustainable development fund imposed by the central government, local governments will have to waive all other charges on coal producers by the end of 2011.

The NDRC said capping coal prices at CNY 800 per ton will still result in considerable profits for coal producers and will not affect market supply.

According to the China Electricity Council, power prices had risen by a cumulative 32% since 2003 while the cost of coal had surged 150%. The China Electricity Council predicts a power supply shortage of 30 million to 40 million kilowatts this winter and next spring.

Thermal power producers generated total profits of CNY 10.4 billion during the first three quarters down by 50%YoY. Third-quarter profits fell 58% to CNY 1.7 billion.

(Sourced from yicai.com)