Higher prices for electricity to leave 80% unaffected


CHINA'S proposed graduated power tariff system, which charges higher rates for heavier users, will leave 80 percent of the nation's households unaffected when implemented nationwide in the first half of the year.

Peng Sen, vice chairman of the National Development and Reform Commission, said yesterday that the government made some adjustments to the 2010 draft plan last year to take into more consideration what people could afford at a time when prices were rising fast.

The new system uses a three-tier structure for electricity prices for residential users, a shift from uniform rates across regions.

The purpose of the new system, part of China's broader energy price reforms, is to address rising energy prices and curb irrational consumption, the commission has said, despite the fact that Chinese families use far less electricity per head than those in the United States.

Peng said about 5 percent of Chinese families with the highest income account for 24 percent of residential power consumption.

Under the new plan, the tariffs for power consumption in the "basic needs" category, which will vary among regions, will remain unchanged and that could cover four-fifths of the nation's households, Peng said.

Each province and municipality will work out their own "basic needs" volume because of their different economic development.

Power rates will be raised by about 0.05 yuan per kilowatt hour in the second category and 0.2 yuan per kwh in the third.

At present, the residential power tariff is 0.617 yuan (10 US cents) per kwh in Shanghai and that halves during the night.

The commission, which sets energy prices in China, has ordered all provinces and municipalities to implement their graduated power tariff system within the first half of this year. It has already been tried out in provinces including Sichuan and Zhejiang.

A spokesman of the Shanghai Development and Reform Commission said that the city was still working on a final plan.

The NDRC says residential tariffs are typically 1.5 to 2 times industrial power in foreign nations because delivering power to households - at the end of the grid and with low voltage level - is the costliest.

In China, residential power is cheaper as the government subsidizes prices. The commission says the government will provide free monthly quotas for the needy.

A problem has existed in China's power industry with regulated tariffs and free-market coal prices often squeezing the profitability of power producers and thus discouraging production. The introduction of graduated tariffs marks a step forward in reforming the power industry, though the impact and significance may be limited because residential users make up only 12 percent of China's power use.

Peng also said the pricing power of refined oil products will remain in the hand of the government, dismissing market speculation that state oil companies may obtain the right.

He said oil companies may be able to adjust fuel prices under a "government guidance price" framework and that will be subject to supervision of price authorities.

China is reforming its refined oil product pricing mechanism which could better reflect changes in global crude rates and end up with more frequent changes in pump rates.

A price rise last week sent domestic fuel rates to a record high.


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