By staff reporters Li Qiyan and Yang Yue

China has raised power distribution tariffs charged by the nation’s power plant operators for the first time in two years, providing some relief for electricity generators squeezed by surging coal prices.

The National Development and Reform Commission, China’s top economic planner, outlined July 3 the on-grid tariff increases following a June notice that nationwide power prices would rise.

NDRC said the new prices paid by grid companies that distribute power would range from as low as 0.0043 yuan per kilowatt hour to 0.035 yuan per kilowatt hour, depending on the region.

The increase will account for up to 80 percent of the overall hike in retail power prices for industrial and commercial users that NDRC announced June 19. That increase of 0.25 yuan per kilowatt hour, or about 4.7 percent, took effect July 1. At the same time, the commission capped the price of coal paid by power plants.

The price adjustments are mainly aimed at offsetting rising costs for power plant coal. But at least 20 percent of the new revenue is earmarked for desulphurization facilities, power grids and renewable energy.

Huadian Power International Inc. (HKSE: 01071, SSE: 600027), the listed subsidiary of Huadian Group, announced July 3 that its average on-grid price would increase by 0.017 yuan, or 4.77 percent, based on the government’s adjustment.

An expert at the China Electricity Council (CEC) told Caijing the recent power price adjustment was determined mainly according to the consumer price index level, not the rate of increase for coal prices as in previous adjustments. That means NDRC has a new scheme for allocating price increases.

China’s power price adjustments are determined by administrative regulation rather than market supply and demand. Six years after the country launched a reform of the power industry, the power price policy at the center the reform has not followed the state’s original route.

The CEC expert said power price controls have led to a series of conflicts and problems, adding the recent adjustment along with the price cap on power coal may create more difficulties in the future for power market reform.

1 yuan = 14 U.S. cents