China Raises Power Prices for Business, Farmers as Summer Shortage Looms
China Raises Non-Residential Power Prices to Ease Shortage
Bernardo De Niz/Bloomberg
China is battling an electricity supply shortfall that may reach as much as 40 gigawatts this summer, surpassing the shortage in 2004, the country’s worst, according to State Grid Corp. of China.
China is battling an electricity supply shortfall that may reach as much as 40 gigawatts this summer, surpassing the shortage in 2004, the country’s worst, according to State Grid Corp. of China. Photographer: Bernardo De Niz/Bloomberg
May 31 (Bloomberg) -- Helen Lau, a Hong Kong-based analyst at UOB-Kay Hian Ltd., talks about China's demand for power. China will raise electricity prices for non-residential users from June, the first increase in more than a year, to curb demand and boost power generation as the nation battles a shortage that may be the worst on record. Lau speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)
May 30 (Bloomberg) -- Richard Iley, chief economist for Asia Pacific excluding Japan at BNP Paribas SA, talks about China's economy and central bank monetary policy. Iley also discusses India, South Korea, and Hong Kong economies. He speaks in Hong Kong with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)
China raised electricity prices for businesses and farmers for the first time in more than a year, threatening to exacerbate inflation as the nation aims to curb power shortages that may be the worst on record.
Rates for industrial, agricultural and commercial users in 15 provinces will increase starting tomorrow while those paid by residential customers will be unchanged, said an official at the National Development and Reform Commission, declining to be identified because of internal rules. Malaysia said yesterday it will raise power prices for the first time in three years.
The increase in electricity costs may complicate China’s fight against inflation, which is above the government’s target. The world’s biggest energy consumer may boost residential rates in the second half, according to Citigroup Inc. Higher prices may spur generation as pressure eases on profit margins squeezed by rising coal costs. An electricity shortfall this summer may be as much as 40 gigawatts, surpassing the 2004 record, State Grid Corp. of China said.
“This will help power producers and give them more incentive to maximize production amid the power shortage,” Zhang Long, a utility analyst at Essence Securities Ltd., said by telephone from Shanghai.
The country’s five largest generators are China Huaneng Group Corp., China Datang Corp., China Power Investment Corp., China Guodian Corp. and China Huadian Corp.
Huaneng Power International Inc. (902), a unit of China Huaneng, rose 0.9 percent in Hong Kong trading to HK$4.55. Its rival Datang International Power Generation Co. fell 0.3 percent and Huadian Power International Corp. advanced 1.8 percent. The benchmark Hang Seng Index rose 2.2 percent.
Consumer Prices
The increase will affect the consumer price index “indirectly” by 0.05 percentage point, China Central Television reported yesterday, citing Liu Shujie, head of economic research at the NDRC. Inflation was 5.3 percent in April and has been above the government’s 2011 target of 4 percent every month this year.
Li Pumin, a spokesman at the NDRC, the top economic planner, declined to comment when contacted by Bloomberg News.
The price adjustment “should allow power producers to increase utilization rates, boosting coal demand,” Daiwa Securities Capital Markets wrote in a research note.
Yanzhou Coal Mining Co. rose 4.7 percent to HK$32.50 in Hong Kong trading, the highest level since its debut in April 1998. Its bigger rival China Shenhua Energy Co. gained 3.2 percent to HK$38.65, while China Coal Energy Co. jumped 2.9 percent to HK$10.52.
15 Provinces
The government boosted electricity rates for non- residential users by an average 16.7 yuan ($2.58) per megawatt- hour, the official Xinhua News Agency said yesterday, citing the NDRC. Power prices for industrial users are currently 470 yuan a megawatt-hour on average, according to government data.
China will increase prices in the provinces of Shanxi, Qinghai, Gansu, Jiangxi, Chongqing, Henan, Hubei, Sichuan, Guizhou, Shaanxi, Shandong, Hunan, Anhui, Hebei and Hainan, according to Xinhua. On-grid power tariffs were raised in 12 provinces by an average 20 yuan per megawatt-hour on April 10, it reported.
The government may increase industrial rates further and raise residential tariffs in the second half, Minggao Shen, Citigroup’s China research head, said by telephone from Hong Kong today. A 10 percent consumer power price rise would push inflation up by 0.25 percentage point, he said.
At least 10 provincial grids serving municipalities including Beijing, Tianjin, Shanghai and manufacturing bases in the provinces of Hebei, Jiangsu and Zhejiang will be affected by power shortages, the official Xinhua News Agency said on May 23, citing Shuai Junqing, an executive vice president at State Grid.
Coal Costs
The country will also ban local governments from giving power tariff discounts to manufacturers that consume large amounts of energy and reinforce monitoring of coal prices to maintain stability, according to CCTV.
Benchmark power-station coal prices at Qinhuangdao port rose 0.6 percent to between 830 yuan and 845 yuan a metric ton as of yesterday compared with a week earlier, according to the China Coal Transport and Distribution Association. That’s the highest since October 2008.
“Tariff-rate hikes are a positive for thermal-coal producers as they would improve the profitability of their customers, the coal-fired power plants,” Daiwa’s Dai said in a report.
China’s power-generating capacity was 960 gigawatts last year, with coal and oil-fired power plants accounting for 73 percent and hydropower dams 22 percent, the National Energy Administration said in January.
To contact the reporter on this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
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