Tariff rises too small to cover costs

PUBLISHED : Tuesday, 04 July, 2006, 12:00am
UPDATED : Tuesday, 04 July, 2006, 12:00am

The central government has announced an increase in the nation's average ex-plant power tariff of about 3 per cent but analysts said this was insufficient to cover higher coal costs that the power suppliers have had to shoulder since the previous tariff revision in May last year.

The average 9.79 yuan per megawatt-hour increase took effect last Friday, according to China Power News, which is run by the State Electricity Regulatory Commission.

The increases range from two yuan in Anhui province and 22.80 yuan in Guangxi autonomous region, according to the National Development Regulatory Commission which sanctions tariff revisions. Eastern China saw the smallest increases.

Power plants that plan to install desulphurisation equipment to reduce gases that cause greenhouse effect can raise tariffs by another 2.40 yuan per megawatt-hour when their installation is certified by the government.

This is the government's second tariff increase after it introduced a coal cost pass-through mechanism which is triggered when coal cost rises more than 5 per cent. Generators may be compensated 70 per cent of coal cost increases and have to absorb the remainder.

Beijing had said it would revise tariffs every six months but kept tariffs steady in November last year even after the pass-through mechanism was triggered.

Huadian Power International yesterday said its average on-grid tariff had been raised by 11 yuan per megawatt-hour. A spokesman said it amounted to about 3 per cent.

'This can't compensate our higher coal costs,' he said, adding the government was unlikely to approve another round of tariff increases because of stabilised coal prices this year.

China Power International Development saw its average tariffs rise by 18 yuan per megawatt-hour or about 7 per cent.

Its spokesman said the Changshu plant had two generating units that would complete desulphurisation equipment installation later this year.

The nation's largest independent power producer Huaneng Power International said its average tariff rose by nine yuan per megawatt-hour which analysts estimate to be a 2.5 per cent gain.

Datang International Power Generation unveils its tariff revision today. China Resources Power Holdings has not decided when to unveil its revisions.