Consumers bear higher power cost

PUBLISHED : Saturday, 09 April, 2005, 12:00am
UPDATED : Saturday, 09 April, 2005, 12:00am

The mainland will allow power companies to pass along increased fuel costs to consumers from next month under regulations that set electricity tariffs based on market forces.

The long-awaited directives, which did not detail how much of the extra costs consumers could be charged, or over what timeframe, were seen as positive for power producers and distributors and a repeat of Beijing's pledge to raise industrial efficiency.

The rules published online yesterday by the National Development and Reform Commission will 'quicken the pace of tariff reforms ... and boost the healthy development of the power industry and the economy'.

Power producers and distributors that want to raise tariffs must apply to the commission for approval.

The directives, effective on May 1, drove Hong Kong-traded stocks of power companies yesterday.

Shares in Huaneng Power International and Datang International Power Generation advanced 2.6 per cent and 2.58 per cent respectively.

'[The directives] were positive,' said an analyst from a European brokerage.

'It shows the government is really doing something about the tariff issue.'

Ex-plant charges will consist of a fixed, government-determined capacity tariff and a volume tariff formed from bidding by power plants, as well as hinged to coal prices.

Wholesale tariffs - charged by grid operators - will be determined by the government before being given over to market forces.

Retail electricity will be put into three categories - residential, rural and business - and tariffs will be set according to usage, for peak and low-demand periods.

Power companies have been looking forward to the new policy since a rapid surge in demand has been offset by higher transport and coal costs.

The mainland has been hit by severe power shortages across the country, where the shortfall last year reached 30,000 megawatts as electricity demand surged 14.9 per cent.

Demand for power in the country this year is expected to rise 12 per cent due to economic expansion of 8 per cent.