Pressured by a nationwide power shortage, the government will increase the price of electricity produced by coal at the beginning of the new year.

The 0.7-fen-(0.08 US cent)-per-kilowatts/hour (kwh) price hike will mostly affect the industrial sector, said Zhang Guobao, vice-minister of the National Development and Reform Commission. He said the increase is directly related to the coal supply shortage and a climb in its price.

"But we are not going to increase the price of electricity for residential use,'' Zhang pledged at yesterday's national meeting on coal supply held in Fuzhou, capital of Fujian Province in East China.

As the electricity shortage has spread to 21 provinces nationwide since the summer, many residents had predicted that the government would increase the cost of power to regulate wasteful use.

"I've bought enough electricity for the next year's use in case there is a price hike,'' said Xiao Yu, a resident living in the Chinese capital's northern suburb.

But commission official Wang Jianping told China Daily that a price boost for residential electricity will be approved only after a public hearing since it is now capped by the government.

"It's no small rise; the base is small but the total consumption of electricity for enterprises is big,'' said Wang. "For power plants it means more profit but for consumers it means more cost.''

For example, a small-sized iron plant, which uses 100 million kwh of electricity annually, will increase its costs by 800,000 yuan (US$96,600). But Wang said the hike will mainly occur in high energy consumption sectors, in which overheating has taken place this year as China's economy maintained a high speed of growth. "The hike is part of the government's effort to curb over-investment in iron and steel, aluminium, auto production and cement,'' said Wang.

According to the national electricity distribution centre, China's electricity consumption rose by 16.5 per cent over the same period last year.

The power shortage in China has affected the lives of ordinary people as well as industrial production. The State Electric Power Regulatory Commission attributed the situation to a number of factors.

First, dry spells plagued China this year and water levels have been especially low this winter, and hydroelectric plants are unable to operate to their full capacity.

Second, many thermal power plants, which constitute the bulk of China's power supply, are operating below their capacity due to an inadequate coal supply.

Third, the use of electricity in heating systems rose drastically this winter.

Fourth, energy-intensive industries, including the production of steel and nonferrous metals, have been growing fast.

The State Grid Corporation forecasts that China's electricity consumption will grow to 2,091 billion kwh in 2004, up some 207 billion kwh over 2003. If this happens, power shortages would worsen and more areas would experience blackouts.

China plans to build up to 10 huge mining enterprises, each capable of producing more than 50 million tons of coal annually, the Society of the Chinese Coal Industry announced recently.

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