Coal-fired plants can charge market prices
Print Edition
China said yesterday it will allow coal-fired power plants to charge some customers market-driven prices for electricity.
Responding to shortfalls in power generation brought on by shortages and record high prices for coal, the government has taken a range of steps to boost coal production and manage electricity demand at industrial plants.
To help power companies pass on the high costs of coal, the National Development and Reform Commission said that all electricity generated by coal-fired plants would be priced via market trading “in an orderly manner” from October 15.
It also instructed commercial and industrial users to buy direct from the market or via agents over the grid “as soon as possible.”
A power crunch has forced production curbs across industries such as cement, steel and aluminium. Utilities have struggled to keep up with post-pandemic demand for electricity, and power plants generated less as rising price of coal rendered operations uneconomic.
Pushing all industrial and commercial users to the power exchanges and allowing prices to be set by the market is expected to encourage loss-making generators to increase output.
NDRC official Peng Shaozong said the reform was “designed to reflect power demand and consumption, and to some extent to ease operation difficulties of power firms and encourage plants to increase power supply.”
The most-active China thermal coal futures contract soared 11 percent to a record high 1,507.8 yuan (US$233.55) a ton yesterday. About 44 percent of China’s industrial and commercial firms are currently trading in power markets, buying electricity over exchanges in cities such as Beijing and Guangzhou, while other such customers buy electricity at fixed prices direct from the state-owned grid companies.
China’s State Council on Friday said it would allow coal-fired power prices to fluctuate by up to 20 percent from base levels, an increase on previous limits. In 2019, China had allowed coal-fired power prices to rise by 10 percent and fall by 15 percent from base levels.
The NDRC said that prices for high-energy consumption firms would not be bound by the 20 percent upper limit.
The commission said residential and agricultural users, as well as public welfare initiatives, would continue to be charged fixed prices, which are often set too low to cover utilities’ costs. Local governments were encouraged to help small and medium-sized and individual business users cover the increased cost of electricity.
While the reforms could push up the producer price index, it would help ensure electricity supplies and stabilize production at industrial firms. Peng said the reform would not have an impact on consumer prices.
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