SHANGHAI Dec 25 China will review on-grid power
tariffs annually and adjust them if thermal coal prices
fluctuate by more than 5 percent a year, the government said on
Tuesday, marking a small step towards broader market-oriented
energy pricing reforms.
China's power tariffs are heavily regulated and are set by
the government. Fixed tariffs have in the past saddled many
thermal power plants with heavy losses and forced them to cut
generation as they struggle with soaring coal prices.
Under the new mechanism, when average coal prices rise by
more than 5 percent within a year, 90 percent of that increase
will be passed through to end-users via a hike in on-grid
tariffs. Power producers will bear the remaining 10 percent of
the coal price increase, China's State Council, or cabinet,
Under the current system, reviews are not conducted on a
regular basis and utilities must shoulder 30 percent of the
burden of higher coal costs.
The move will allow domestic power tariffs to better reflect
fuel prices and comes after the government said it would scrap a
regulation that caps spot thermal coal prices and would no
longer intervene in annual coal price negotiations.
China has vowed to reform its energy and resource pricing
system to encourage users to be more economical with their
The National Development and Reform Commission, the
country's top economic planner which sets oil and gas prices,
also submitted plans last year to revamp the retail fuel pricing
system to better reflect market costs, including the possibility
of more frequent price changes.
(Reporting by Fayen Wong; Editing by Edmund Klamann)