The water level is set to rise further, displacing as many as 1,000 farmers
Water levels in the Three Gorges Dam reservoir will rise by four metres by the end of the month in an effort to boost electricity production and alleviate power shortages.
The move will require the immediate relocation of more than 1,000 farmers.
Raising the water level to 139 metres will increase the dam's storage capacity to 1.84 billion cubic metres and allow electricity production to be boosted by 700 million kilowatt hours.
A Three Gorges Project Development Corporation spokesman said the dam currently had three generators online with a production capacity of about 3 billion kilowatt hours. Officials had previously said that by the end of this year a total of six generators would be in operation with an output capacity of 7 billion kilowatt hours.
A local source said the State Council had already authorised the spending of 50 million yuan (HK$47 million) to cover relocation costs and severance payments.
Experts said the government's decision to raise the dam's water level had long been discussed and was made because of the recent surges in electricity demand and flood prevention needs.
Fuelled by a summer heatwave and strong growth in industrial production, at least 16 provinces and cities in the eastern and southern parts of the country have endured power shortages, with some regions such as Shanghai forced to ration electricity use.
Gu Zhaoqi, a professor of hydrology at Tsinghua University in Beijing and adviser to the Three Gorges Project Development Corporation, said now was the best time to raise the dam's water levels.
'The region is not expected to have any heavy rains in October, making the storage much easier,' he said.
He said officials would lower the water level back to 135 metres around February-March to maintain the Yangtze river's water flow during the dry months and to prepare for the rainy season in April.