Government to Cut Prices to Allow Compensation to Coal Suppliers
The national government is planning to cut down on the wholesale prices that distributors are paying for electricity coming from coal fired plants a move that experts says will allow the compensation to struggling coal suppliers. The National Development and Reform Commission are telling provinces to impose a cut at an average rate of .0093 yuan per kilowatt per hour. Some cuts started last Friday in which power companies might adopt different dates in implementation but retail prices will remain the same.
In September 2013, china has adjusted the on grid power tariffs cutting it by .025 yuan per kilowatt hour then used a coal tariff linkage system wherein tariffs were subjected to change when coal prices fluctuates by 5 percent. The mechanism was introduced in 2004 but not followed. Experts are saying that the government might use the extra funds in compensating coal producers since they are barely making money as recent study showed that more than 70 percent of Chinese coal companies are now losing money and 50 percent of these companies are late in paying wages.
These tariffs cuts are small and will only have limited impact on these power companies as these cuts will remove more than 5 billion yuan of profit from the top five state owned power companies.