Datang urges Beijing to further lift power prices to relieve coal cost squeeze
The company says authorities have not done enough to properly execute the mechanism to link power and coal prices introduced in 2004
The company, the listed flagship of one of the big five state-owned power generation majors, China Datang Group, will also lobby regulators to properly implement Beijing’s long-established but poorly executed mechanism to link power and coal prices that would subject power producers to less volatility in their earnings.
“The power price adjustment last month was not a real implementation of the coal cost pass-through mechanism,” the firm’s director of finance department, Sun Yanwen told reporters on Thursday.
“We will reflect the industry’s plight to the government and call for its proper implementation.”
The mechanism, launched in late 2004, allows power producers to pass on to customers 70 per cent of cost increases or declines if coal prices jumped or fell more than 5 per cent year-on-year over a six-month period.
The power price adjustment last month was not a real implementation of the coal cost pass-through mechanism
But increases of state stipulated wholesale power prices had failed to match those of coal prices in some subsequent years, most notably between 2008 and 2011, resulting in industry-wide losses.