China plans tiered power pricing for homes in H1 -paper

China will roll out tiered power pricing for residential customers in the first half of this year, to charge higher prices for heavy users, a government official was quoted as saying on Thursday, aiming to ease chronically tight power supplies.

"The proposal for progressive power tariffs has already been approved by the State Council and will be rolled out in the first half of this year," Peng Sen, deputy director of the National Development and Reform Commission (NDRC), was quoted as saying in the 21st Century Business Herald.

"Various provincial governments are currently working on relevant programs to push this forward."

Under the new mechanism, electricity prices will be set in three tiers based on power usage. Prices will be raised by 0.05 yuan ($0.01) per kilowatt hour for the second tier and 0.30 yuan for the third tier, the paper said.

China currently charges uniform rates for electricity use. Plans for pricing reform were mooted more than two years ago but have faced delays due to inflationary pressures.

The reform would mark the first of many more painful steps needed for China to solve its power supply problems.

Fixed tariffs have saddled many thermal power plants with heavy losses and forced them to cut generation as they struggle with climbing coal prices.

While the NDRC, China's state planning agency, occasionally raises the on-grid tariff for power producers, they generally are too late and too little to offset the impact of steep rises in coal prices.

But with residential users accounting for only around 10 percent of China's total consumption, experts have said the planned price reform would only have a modest impact on energy savings and would do little to ease power producers' pain.

A more effective solution would be for the government to implement a permanent price mechanism that adjusts power tariffs in direct proportion to changes in coal prices, Zhai Ruoyu, former general manager of China Datang Corp, has said.

Residential power prices have not changed since September 2008. They ranged from 0.36 to 0.62 yuan/kWh in China's 31 municipalities, provinces and regions in 2010.

here