The government may raise the electricity rate for most industrial users early next month to help power generating firms pass on the coal cost hike.

Liu Zhenqiu, deputy director of the pricing department of the National Development Reform Commission (NDRC), China's top economic planner, yesterday said the government will implement the long-awaited "coal-electricity pricing linkage" mechanism in the first half of May.

The mechanism allows power companies to float the on-grid electricity rate to cover 70 percent of the coal cost hike.

The scheme will be a relief for Chinese power companies. Many generating firms suffered losses last year as their electricity rate was capped too low for them to cover fuel costs, which surged by almost 50 percent last year compared to 2003.

Liu made the remarks to reporters on the sidelines of an international coal conference yesterday, but would not elaborate.

Industrial sources said NDRC has submitted the proposal to the State Council for approval. It advises that electricity for industrial use may rise by 2.13 fen (0.25 US cents) per kilowatt-hour on average across the country. That will raise the country's total electricity bill by billions of yuan this year, adding weight to inflation.

But households, agriculture, and fertilizer manufacturers are not subject to the new tariff.

(China Daily April 12, 2005)