(Ecns.cn) – Managers of major power firms in north China's Shanxi Province recently teamed up and paid a visit to Beijing to demand a rise of on-grid prices amid low profit margins or, in some cases, major losses, reported the Economic Information Daily.
Referred to as China's capital of coal, Shanxi produces over 800 million tons of coal every year. However, most local power firms have been suffering significant losses this year.
According to statistics released by the Shanxi Power Industry Association, 13 thermal power plants in the south central part of the province suffered a total loss of 328.9 million yuan ($50.8 million) from January to October. Currently they have insufficient capital to purchase or store coal.
The reason is that the country's coal price growth has outpaced state-set electricity tariffs. From early 2008 to October 2011, coal prices for the plants have increased from 340 yuan ($52.6) per ton to over 800 yuan ($123.7) per ton, up about 130 percent.
An unnamed staff member from one of the 13 thermal power plants revealed that they began to suffer losses in September 2008, and are currently losing 0.085 yuan ($0.013) for each kilowatt-hour produced.
The situation is similar in other provinces. The China Electricity Council estimated combined losses in the first seven months of this year at more than 7.46 billion yuan ($1.15 billion) for the five largest generating companies, including Huaneng, Huadian and Datang.
Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, said the time is right to raise power prices, but that the increase of electricity rates may not be much. The key solution is to reestablish the linkage mechanism between coal and electricity prices, he added.
