Power Companies Call for Price Hike

By staff reporter Xu Ming, Caixin

Five Chinese power companies have submitted a joint application to regulatory authorities to offset thinning profits from tighter energy supplies

China’s top five power generation companies are calling for a raise in electricity prices in the face of increasing coal prices and lower hydropower supplies due to the severe drought in southwestern China.

Chinese newspaper International Finance News reported on April 6 that the five power companies — Huaneng Group, Datang Corp., Huadian Corp., Guodian Corp. and China Power Investment Corp. have submitted a joint request to the government for higher prices.

But Tan Rongxiao, spokesperson of the State Electricity Regulatory Commission (SERC), told another newspaper that the commission has yet to review the proposal. The companies and industry association China Electricity Council haven’t commented on the news.

Some analysts believe that power companies were spurred to action due to heavy losses in February. According to the National Statistics Bureau, from January to February, the monthly average profit margin of China’s coal-fired power industry declined 74 percent from the September to November period.

Liu Nanchang, director of the General Bureau under the State-owned Assets Supervision and Administration Commission, revealed on March 27 that a large number of central-owned power companies are facing increasing operation risks as their debt ratio has exceeded 80 percent.

Lower hydropower supply, caused by the drought in southwest China, has driven up the demand of coal for power generation, and according to some analysts, the tension between coal supply and demand will only strengthen, forcing power companies to seek higher electricity prices.

Zhu Liang, analyst from the Productivity Promotion Center of Commerce Automation, said that with inflation pressures in mind, the government could opt for a gradual increase in power prices. The government may also offer subsidies to coal-fired power companies in southwest, said Zhu.

China’s current electricity tariffs were set in November last year, which increased by 0.028 yuan per kwh from the previous level.