Datang director sees pricing liberalisation only with new generating capacity Chronic power shortages mean the mainland is unlikely to introduce competitive power tariffs for at least four more years, according to a leading industry executive. Only when fresh generating capacity comes on stream, balancing supply and demand, will a full-scale liberalisation of tariffs become possible, according to Yang Hongming, an executive director at Datang International Power Generation, one of the largest power firms in northern China. Beijing plans to overhaul its power tariff system to promote a more efficient market but the plan will be delayed until at least 2007 as poorer regions will be outbid by prosperous areas, potentially pricing them out of the market for essential power. Tariffs are now set by local price bureaus according to production costs, depreciation and interest charges. Power rationing is a commonplace solution to deal with shortages. The State Electricity Regulatory Commission has outlined broad liberalisation policies, but details on implementation remain fuzzy. 'China's current planned power projects will bring only about 30,000 megawatts of new capacity on to the market in the next few years,' Mr Yang said. 'This is barely enough to meet the annual power demand growth, not to mention relieving the current shortage. 'I believe it would be extremely difficult to introduce competitive power tariffs nationwide in the next three to four years.' Limited tariff bidding has been introduced in northeastern China after the central government declared success at trial runs, while trials are being undertaken in eastern China and planned to be rolled out in central China. Analysts have said that a national reserve capacity of 30 per cent was necessary to implement fully fledged power pooling and tariff bidding. The result is likely to be efficient producers gaining market share on the basis of offering lower tariffs. Mr Yang also expected the National Development and Reform Commission to intervene again at the coal sale and purchase meeting of power and coal producers in November. The ritual will see the signing of next year's coal-supply contracts. When coal supply started to get tighter in late 2002, the meeting dragged on for two months and the commission had to force a coal price on the buyers and sellers. Last year, the commission announced guided power tariff and coal price increases, and demanded buyers and sellers sign deals with each other, which saw the meeting ending much sooner. 'I think the commission has learned from the results of last year's meeting and I think they will act swiftly again this year,' Mr Yang said. 'They would not allow negotiations to go on for two months again.' That approach backfired when the market price of coal surged by 33 per cent in the first half of the year, causing coal producers to stop delivering the fuel to power firms since they could earn more in the private market.