China may soon raise power tariffs by 0.025 yuan per kilowatt hour to prevent widespread shortages over the winter and is also considering capping benchmark spot coal prices at 800 yuan ($130) a tonne in a move to thwart a coal price rally, a state newspaper said on Wednesday.
The China Securities Journal said the window of opportunity for the government to raise power tariffs was "drawing closer" as inflation has eased from recent peaks, adding a hike was necessary to help power producers, who have been losing money on thermal generation. In a sign that a power price hike was imminent, several state-run newspapers have begun to speculate about a possible price increase.
The paper did not say when a price rise would be imposed, but it cited unidentified industry sources as saying the hike may extend to residential users and may also affect more provinces this time.
A price rise in June was limited to industrial users in 15 provinces. To prevent higher power use from driving up spot coal prices, the government was also considering making a pre-emptive strike by ordering a price cap of 800 yuan on spot benchmark coal prices with a heating value of 5,500 kcal/kg. But to help its coal miners deal with rising production costs, Beijing may allow 2012 contract prices to rise by about 5 percent, the paper said, citing unidentified sources from the China Coal Transport & Distribution Association.