China hikes power price to prevent blackout

China will  raise its power tariffs by over 5 percent, the second increase this year.

This is among the remedies to stem heavy losses from its power plants and prevent widespread blackouts over winter.

In a pre-emptive move to thwart a possible rally in coal prices, the National Development and Reform Commission  has also ordered benchmark spot prices with a heating value of 5,500 kcal/kg to be capped at 800 yuan or $130 a tonne.

The China Electricity Council has warned of a severe winter power shortage topping 40 gigawatts. Industry observers said the writing was on the wall after weeks of speculation in state-run media.

Chinese power plants have plunged into the red since 2010 as they struggled with rising coal prices and capped power tariffs. Frustrated over heavy losses, some plants in Shanxi province which have the lowest grid feed-in prices, have cut generation rates by half.

The government will raise power prices for non-residential users by about 0.03 yuan per kilowatt hour or about 5 percent and increase grid feed-in tariffs for coal-fired power plants by 0.026 yuan/kWh or about 6 percent, the NDRC said in a statement.

"A hike in power price will reduce the cost pressures for power firms while restricting unreasonable demand from energy-intensive sectors," the NDRC said.

The latest hike will be the second increase since June, when the government raised charges for non-residential users by about 3 percent in 15 provinces and upped the rates grid operators paid to power firms by around 5 percent.

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