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UPDATE 1-China to Raise Power Prices for Energy-Intensive Sector
May 14,2010 10:34CST
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BEIJING, May 14 -- China will raise power tariff surcharges for some energy intensive firms by 50 to 100 percent from June 1, in renewed efforts to curb expansion in energy-guzzling and polluting industries.

For firms that fall into the restricted category, power surcharges will rise to 0.1 yuan per kilowatt hour from 0.05 yuan previously, while those under the to-be-eliminated category will see their power price surcharges rise to 0.3 yuan per kWh from 0.2 yuan in the past, the National Development and Reform Commission said in a report posted on its website on Thursday.

These firms are mainly in the aluminium, cement, steel, zinc, ferroalloy, calcium carbide and sodium hydroxide sectors.

Local governments and power suppliers must cancel any ongoing favourable power prices to aluminium, ferroalloy and calcium carbide makers at a designated date, and any preferential power rates in the name of direct trade between power generators and power users but without any approvals must be halted immediately, the report said. It sourced a joint notice by the NDRC, State Electricity Regulatory Commission and National Energy Administration.

Beijing had asked local governments and power firms to cease preferential power price treatment to energy intensive sectors in the past, but the calls were loosely followed as local governments wanted to boost their economic output and increase fiscal revenues.

The policies were mostly ignored since late 2008 when the economy was roiled by the global slowdown.

A rise in the power fees would increase the cost of production to the aluminium industry, Lu Youqing, vice president of Aluminium Corp of China (Chinalco), said.

"Costs being driven up is a big problem," he said, referring to the industry. Chinalco is China's top aluminium producer with 4 million tonnes of smelting capacity which is operated by listed Chalco <2600.HK> <601600.SS>.

Smelters use 13,000-15,000 watts of electricity to produce one tonne of primary aluminium in China, one of the most power intensive products.

Punitive power tariffs will be introduced for firms whose energy intensity -- energy consumption in each unit of output -- surpasses stipulated standards, according to the report. ($1=6.825 yuan)


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