Beijing poised to raise power prices

Beijing is mulling its second power price increase in two months as widespread losses in the power generation sector worsens.

The price rises were flagged after the China Electricity Council, which represents power generators, said shortages in peak demand periods could amount to more than three per cent of the nation's installed generation capacity this year and double that by 2013.

Beijing plans to raise prices charged by power generators to distributors in Jiangxi, Hunan and Guizhou by 20 yuan (HK$23.88) per megawatt-hour, the official Shanghai Securities News reported, quoting unnamed people familiar with the situation. This is equivalent to increases of between 4.5 and 6 per cent.

It also plans to give a five yuan per megawatt-hour rise to Hubei and Henan, the report added, without giving a time frame. This equals increases of 1.1 per cent to 1.2 per cent.

An official at one of the Hong Kong-listed mainland power generators said the firm was informed about the proposed rises, although no official document has been released. Officials at the pricing department of the National Development and Reform Commission (NDRC) were unable to confirm the price rises.

The latest proposed rises follow a previous round of price increases in April, although the latter was never officially confirmed by Beijing.

'It is well-known in the industry that Beijing wants the price rises to be low profile, given the sensitivity of consumer price inflation,' the official at the Hong Kong-listed firm said.

Beijing has kept end-user power prices stable since the second half of 2009 to avoid stoking heightened inflation, which means the state-owned power distributors are absorbing the costs stemming from the price rises to generators. Amid rising coal prices Beijing last month decided to raise the prices charged by coal-fired power plants by an average of 7.3 yuan per megawatt-hour, or 1.9 per cent, according to a report by Pierre Lau, head of Citi's Asia utilities research. Of that amount, 2.70 yuan per megawatt-hour, or 0.7 per cent, would take effect retroactively from January last year, and 4.60 yuan per megawatt-hour, or 1.2 per cent, starting from April 1 this year.

Samsung Securities head of utilities research Gary Chiu said the proposed rises in Hunan and Jiangxi would have only a small impact on Hong Kong-listed mainland power generators as they account for zero to 5 per cent of sales.

The increases in Henan and Hubei will have more impact, as they take up 40 per cent of China Power International Development's sales and 15 per cent of China Resources Power Holding's sales.

1988

The year in which the State Council founded the China Electricity Council (CEC)