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Electricity Price Raised to Cool Down Economy

China raised the average price of electricity by 0.022 yuan per kilowatt/hour this week to cool down the overheated growth of some energy-gobbling industries and so help ease the power shortage.

The price hike involved power grids in south, east, central and north China. Higher prices were adopted for peak time electricity consumption in Shanghai, Beijing, Tianjin, Hebei, Jiangxi and Chongqing. Compensation measures were also introduced in Shanghai to encourage off-peak power usage.

In Jiangsu, Hunan and Henan provinces, electricity suppliers and distributors have coordinated their pricing movement at peak and off-peak periods. In Hunan province and some places with abundant hydropower resources, electricity prices differ in wet and dry seasons.

In order to curb blind expansion of the industries consuming large amounts of electricity, the Chinese government has decided to adopt differentiating power prices for six raw material sectors, namely alumina, ferroalloy, calcium carbide, caustic soda, cement and steel. Punitive higher power prices will apply to enterprises that fail to meet the requirement of national industrial policy.

According to the State Development and Reform Commission (SDRC),the electricity prices will remain at the higher level for the next 12 months.

A SDRC official said the price adjustment was aimed to encourage investment and expansion of electricity generation and curb excessive power consumption.

China's rapid economic growth has severely strained the country's electricity supply. Some 24 provinces and municipalities have suffered blackouts so far this year, especially in the provinces of Zhejiang, Jiangsu, Shanxi, Guizhou and Sichuan. The shortfall of electricity supply is expected to top 20 million kw in late June and expand to 30 million kw in the third quarter.

The current price hike is estimated to boost the revenue of power industry by 3.7 billion yuan (450 million US dollars) every month. The money will mainly be used to pay interests of loans on power plant construction and offset the increase of fuel costs, according to SDRC.

In order to ease the power shortage, China has begun to adopt variable prices at peak and off-peak times of electricity consumption since last year. It has also abolished price discount on power supply to 14 key state-owned alumina factories.

However, prices of electricity supply for farmers' daily living and production activities remained basically unchanged or dropped. Power prices for urban residents were unchanged.


(Xinhua News Agency June 17, 2004)

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