May 05th, 2011 | Global Times Electricty price control stifling supply
Even before the summer heat starts sucking energy for air conditioners, China’s electricity rates should be increased to address a nationwide power shortage, according to analysts.
“The current electricity rates are too low and can no longer mitigate the rising cost of power generation,” Zhou Dadi, vice chairman of the China Energy Research Society, told the Global Times. “It’s time to lift the administrative control on electricity rates to allow it to fluctuate to reflect market demand.”
China’s electricity rates have long been subject to administrative approval and the government directly sets the on-grid, transmission, distribution and retail rates.
This price control on electricity and subsidiaries for power companies have led to more waste, Zhou said.
In a newly released report, the China Electricity Council (CEC) proposed the government raise electricity rates “appropriately” to address the power shortage sweeping a large part of the country, especially eastern and southern regions.
The report didn’t mention by how much, or when electricity rates should be raised.
Power use in March approached the level of last summer’s peak season and may increase 12 percent to 4.7 billion megawatt-hours this year.
The power supply shortage could increase to 30 million kilowatts this summer, the worst shortage since 2004, according to the CEC.
About 20 Chinese provinces started rationing electricity this year, the National Development and Reform Commission said.
Zhou attributed the shortage to increased power demand due to economic growth and rising coal costs.
Coal prices have been rising every week since March. They hit a new high of 808 yuan ($124.42) per ton between April 20 and 26.
“The rising cost of coal and price control on electricity rates has dampened the enthusiasm of power companies to expand capacity with some of them even temporarily shutting down their plants,” Zhou said. “If electricity rates are adjusted according to the market it will promote a more energy efficient model of economic growth and fundamentally solve the power shortage.”
By Song Shengxia