THE government may soon raise electricity rates to help power firms get over the hike in coal prices, a vice-chairman of State Electricity Regulatory Commission said on Friday.
“The government has nailed down a scheme to increase electricity tariffs nationwide to reflect last year’s increase in coal prices,” said Shao Bingren, vice-chairman of the industry watchdog.
Sources said the government might raise the electricity rates by 0.01-0.02 yuan (0.46 sen to 0.9 sen) per kilowatt/hour.
That means the country will have to pay as much as 48 billion yuan (RM22bil) more for electricity this year, adding weight to inflation.
If the plan is implemented, the consumer price index (CPI) will rise by 0.12%, industrial sources calculated. The National Development and Reform Commission earlier predicted a 4% growth in the CPI this year.
The sources expected the rate increases to vary from area to area.
Eastern China, where coal prices increased more drastically last year, may see the cost of electricity rise by more than 0.02 yuan per kilowatt/hour.
The public, as well as fertiliser and agriculture industries, however, may escape the rise as the government intends to protect the interests of residents and agriculture industry.
The imminent electricity price hike comes as a result of the government’s implementation of the coal-power pricing linkage scheme.
Under the scheme, power companies can transfer 70% of the rise in fuel costs to end users, should coal prices increase by more than 5% within a six-month period. Power companies will have to absorb the remaining 30% themselves.
The scheme was designed to give some respite to power companies which have been struggling with surging coal prices since late 2003.
Coal costs – which make up half of the production costs of power plants – increased by almost 50% last year over 2003. – China Daily