China may raise power prices as early as Oct-media

BEIJING, Sept 28 (Reuters) - China may raise both on-grid and retail power prices as early as October, Caijing magzine reported on Monday, as speculation intensified amid swelling losses at grid operators and a face-off between power majors and miners.

Electricity prices for end-users will be hiked by around 0.024 yuan per kilowatt hour while overall feed-in tariff for power generators will be increased despite some being cut, the report said, citing a draft plan but did not identify sources.

The move, if it occurs, will help ease the pressure on grid operators who have seen their profits dwindling and losses rising because they could not pass on higher input costs to consumers.

It would also affect supply talks between power firms and coal miners.

The State Grid Corporation of China, China's leading grid operator, made a loss of 17 billion yuan ($2.5 billion) in the first half of this year, the report said.

It earned some 9 billion yuan last year despite losses caused by ice storms in southern China in early 2008 and the Sichuan earthquake in May last year.

Beijing was considering raising power prices and activating a power pricing mechanism before the year-end, a Chinese newspaper reported in August, citing a source and an energy official. [ID:nPEK16055]

Under a scheme introduced in 2004, the government would adjust power prices if coal costs shift 5 percent every 6 months, but the rules have been loosely followed since 2005 and have been largely idled in the past two years. Beijing worried that too many increases coming too quickly in accordance with surges in coal prices might hinder economic growth and cause social unrest.

Coal-fired power plants, which produce nearly 80 percent of China's electricity, suffered hefty losses last year during the global commodities boom as they could not absorb most of the increase in coal costs despite two power price hikes.

China's five major power generating groups have been in a tussle with coal miners since late last year in their annual supply talks. They insisted on steady coal prices due to power price caps, while miners asked for an increase because coal prices under long-term supply terms were below market rates, and because they faced higher tax charges.

These power firms include parents of China Power International (2380.HK), Datang International Power Generation Co Ltd (0991.HK)(601991.SS), Huadian Power (1071.HK)(600027.SS), Huaneng Power International (0902.HK)(600011.SS) and GD Power Development Co Ltd (600795.SS).

But the confrontation has been partially resolved amid the slump in coal prices caused by the global economic downturn, and both sides have taken flexible measures such as trading via middlemen, signing quarterly or monthly deals and paying in advance.

Coal shipments are normal and supplies to power plants are largely stable, the National Development and Reform Commission, China's top economic planning ministry and price regulator, has said.

Profits in the power industry in the first eight months of this year surged 194 percent from a year earlier, according to the National Bureau of Statistics. (Reporting by Jim Bai and Chen Aizhu, Editing by Jacqueline Wong)