Happiness levels need power surge

PUBLISHED : Tuesday, 14 June, 2011, 12:00am
UPDATED : Tuesday, 14 June, 2011, 12:00am


On the whole, politicians everywhere should try to keep the necessities of life as bountiful and inexpensive as possible. On the mainland, where harmony and happiness are so much a part of the central government's current social doctrine, this is especially so, with price controls on essential foods and heavy subsidies that make water and electricity among the cheapest in the world. There is a point in a country's development, though, where it is unrealistic to keep charges artificially low, and that is especially so when there is galloping growth, burgeoning demand and rising inflation. China has all three and the consequence is that the power generation sector is ailing.

Power shortages are a perennial occurrence in many parts of the mainland, especially during the summer months of high demand, but not since the widespread outages of 2004 have circumstances appeared so dire. Hong Kong-owned factories in Guangdong have been forced to suspend operations or turn to expensive and highly polluting oil generators for several hours a day, two or three days a week, since the start of last month. Heavy industries such as steelmaking have been told by the government to expect disruptions until September and production output levels have been cut back. And as more and more air conditioners are turned on, it will only get worse; the largest power company, State Grid Corporation of China, has warned that 26 provincial regions under its management will suffer combined shortages of 30 million kilowatts this year.

That is not a recipe for happiness, although little can be immediately done considering the reasons behind the looming crisis. Grid transmission problems, insufficient power stations in some areas, a drought affecting hydroelectricity production in central and southern provinces and a shortage of coal are largely to blame. But more critical is the fact that the government has set the tariff on electricity so low that it is not in the interests of power companies to increase output during summer, let alone keep up with demand. More than half of the firms are financially in the red and with fossil fuel prices surging, they have little hope of turning a profit so that they can invest in improved infrastructure.

The government is not blind to the problem; charges have been gradually rising and recently, it increased them again by an average of 1.67 yuan per megawatt hour for agricultural, commercial and industrial users in 15 provinces. Lifting charges is in the right spirit, but an increase of such a minuscule amount that does not affect citizens will have little impact. Electricity prices have to be set at realistic levels and that requires imposing meaningful rates. No one will be truly happy until there is a reliable supply of electricity all year round.