In line with the circular recently issued by the National Development and Reform Commission (NDRC), some provinces are considering raising domestic electricity tariffs following the hike in electricity bills for industrial and commercial sectors.

The move is an attempt to cover the increasing costs of power generation, which have been spiralling since June last year because of surging coal prices.

The Henan Development and Reform Commission in Central China recently held a hearing on a proposal to raise the cost of electricity for domestic use by 0.05 yuan (0.6 US cents) per kilowatt-hour from June 15.

The province has also raised prices for the industrial and commercial sectors but charges for the agricultural sector remain unchanged.

Shandong, a neighboring province of Henan in East China, increased domestic electricity charges by 0.02 yuan (0.24 US cents) per kilowatt-hour from May 1, following a hearing at the end of last month. The province's industrial sector will have to pay an additional 0.0272 yuan (0.33 US cents) for every kilowatt-hour, however charges for businesses involved in agricultural production and small and medium-sized fertilizer production remain unaltered.

Other provinces and municipalities including Beijing and Shanghai have promised no changes to domestic and agricultural electricity rates.

Most of China's provinces have raised the electricity tariffs in the industrial and commercial sectors, but made no changes to power prices for the public and agricultural usages, in accordance with the coal-power pricing linkage mechanism implemented by the NDRC - the country's top policy planner - from May 1.

Under the new mechanism, the power companies can transfer 70 percent of the rise in fuel costs to end users.

The power companies have to cover the remaining 30 percent themselves.

In order to solve the long-standing pricing dispute between the coal and power industries, power prices have been allowed to rise by an average of 0.02 yuan (0.24 US cents) per kilowatt-hour from May 1. In some provinces, hearings must be held before any changes are made to domestic electricity tariffs.

The nationwide price hikes in electricity will have a far-reaching impact on the country's economy, said industry analysts.

"If the government does not work out pertinent countermeasures in the sectors of finance and industrial investments, China will suffer from a higher degree of inflation compared with previous years," said Wang Xiaohui, an industry analyst with Beijing-based CITIC Securities.

He projected the central government will accordingly adopt some measures to further curb investment in some heavy industrial sectors and contain possible price increases in other areas.

The price increase in domestic power consumption, however, will only have a minor impact on people's lives, because power bills still only account for a small proportion of residents' spending, Wang said.

Power companies will benefit most from the price increases. Zhang Shaopeng, a senior official from Beijing Datang Power Generation Co Ltd, said the rise in tariff rates would "greatly" boost their sales revenue, but did not give figures.

(China Daily May 10, 2005)