China said yesterday that it plans to allow the country's two power grid firms to raise electricity prices for the second time this year to help fund billions of yuan to upgrade the networks.
"Issues such as how much prices will increase, when the price rise will take effect, which areas in China will be affected, and whether residential users will be affected this time have not yet been decided," said an official surnamed Zhang from the State Grid Corp.
According to earlier state press reports, China's State Development and Reform Commission has given approval to State Grid Corp and Southern Power Grid Corp to increase their retail power prices by an average of 3.5 percent for domestic users and 1.8 percent for industrial users.
The country's economic planning body which determines utility prices declined yesterday to comment on the move.
The transmission firms, both state-owned, are planning to spend a combined total of 120 billion yuan (US$14.5 billion) this year to expand their grid networks to cope with the soaring demand for electricity.
However, the move to hike prices seemed to contradict the commission's orders to local authorities to cap increases for utility prices such as water, gas, electricity and public transport to curb rising inflationary pressures in the economy.
Electricity prices for industrial and commercial users have already gone up once this year, after the commission approved a rise of 0.008 yuan per kilowatt in January.
China faces growing power shortages due to a combination of bad planning, stronger-than-expected economic growth, decreasing water supplies for hydroelectric power generators and disruptions to coal supplies.
Many businesses in Shanghai and Guangdong Province are already experiencing power rationing and the government has warned the shortage will only get worse this summer.
Yet last month Shanghai promised no blackouts during the peak electricity-user months of the summer as the city works to add power capacity of about 1.8 million kilowatts.
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