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China hikes power tariffs, adjusts coal prices to ease power shortages

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BEIJING, Nov. 30 (Xinhua) -- China on Wednesday announced adjustments for the prices of non-residential power and thermal coal in order to ease power shortages and reduce financial pressure on power companies.

The National Development and Reform Commission (NDRC) announced Wednesday that it will raise the retail price of electricity for non-residential use by an average of 0.03 yuan (0.47 U.S. cents) per kilowatt-hour (kwh) nationwide starting Thursday.

The move marks the first nationwide power price hike since November 2009, when the price of electricity for non-residential use was lifted by 2.8 fen (0.4 U.S. cents) per kwh.

It also comes at a time when consumer prices have started to show a downward trend. In October, China's consumer price index, a main gauge of inflation, rose 5.5 percent, the slowest rate of growth in five months, although it still exceeded the government's full-year target of 4 percent.

Residential electricity prices will not be raised this time, although China will adopt a gradual power tariff mechanism for residential use, which means prices will increase with consumption, the NDRC said.

"Rapid growth in consumer prices has been checked and the electricity price adjustment will not have an impact on the trend," the NDRC said in a statement on its website.

The NDRC also said that it will allow the contract price of major thermal coal to float by no more than 5 percent next year, but the spot price of 5,500-kilocalorie coal should be capped within 800 yuan per metric ton at major shipping ports.

The prices will stay in place until thermal coal prices stabilize on a national level, it said.

The power tariff plan will consist of three levels, the NDRC said. The top 5 percent of consumers will be charged the highest price, as their power consumption accounts for 24 percent of total residential consumption.

Meanwhile, 80 percent of consumers will not be affected by the price hikes at all, the NDRC said.

Detailed adjustments for residential power prices will be decided at local public hearings, the NDRC said.

Low-income families will enjoy a free supply of 10 to 15 kwh of electricity each month, saving them 60 to 90 yuan each year, the NDRC said.

The thermal coal price adjustment will offer relief to Chinese power plants, which have been squeezed between surging coal prices and market demand.

On Nov. 23, the average spot price of thermal coal was 850 yuan per metric ton, up 9.5 percent from the beginning of this year, according to the Bohai Rim Steam Coal Price Index, China's government-run coal price gauge.

China's power consumption rose 11.35 percent in October from one year earlier to reach 379.7 billion kwh in October, the National Energy Administration (NEA) said earlier this month.

China's five largest power plants, which account for half of the country's total installed power capacity, experienced a collective loss of 26.6 billion yuan in their thermal power ventures during the first three quarters of the year, according to the NDRC.

The China Electricity Council (CEC) has previously stated that China will likely face a power shortage of 30 million to 40 million kilowatts during this winter and the coming spring.

"The increased prices will offset losses and encourage output. At the same time, they will help curb excessive energy consumption and excessive growth in energy-intensive industries," said Xue Jing, director of the statistical department of the CEC.

The NDRC also pledged to boost supplies and transportation of thermal coal and strengthen supervision of price changes to ensure a more stabilized coal market.

As the world's largest coal consumer, China consumed 2.28 billion metric tons of coal in the first nine months of the year, up 10.3 percent year-on-year.

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