China Yangtze Power raises on-grid charges
By Wang Ying (China Daily)
Updated: 2005-08-17 08:59

China Yangtze Power Co Ltd, owner of the world's biggest hydropower Three Gorges Project, increased its on-grid charges by some 38 per cent from August 5.

On-grid prices for electricity produced by its Gezhouba hydropower plant were raised to 0.22 yuan (2.7 US cents) per kilowatt-hour from the previous 0.1599 yuan (1.97 US cents) per kilowatt-hour, or an increase of 0.06 yuan (0.74 US cents), the Shanghai-listed company said yesterday in a statement on the Shanghai stock exchange.

The price increase already approved by the National Development and Reform Commission (NDRC) and Yangtze Power's shareholders applies to the grid companies in provinces and municipalities, including Hunan, Henan, Jiangxi, Shanghai, Anhui, Jiangsu and Zhejiang.

On-grid prices for the Hubei Province, where the Gezhouba plant is based, remains unchanged.

China's power producers now directly sell their electricity to grid companies, such as the State Grid Corp of China and the China Southern Power Grid, at the on-grid prices, and then these grid companies distribute the electricity to consumers with electricity retailing tariffs controlled by the NDRC.

The retailing tariffs will not be affected by the tariff increase, said Zhang Dingming, secretary of Yangtze Power's board of directors.

"We will lower the Three Gorges fund in these tariff-raised regions to offset the tariff hike," Zhang explained.

The country has imposed an addition to the electricity tariff nationwide as a special fund to aid the Three Gorges Project since 1992. Electricity consumers have had to pay an extra 0.004 yuan (0.05 US cents) per kilowatt-hour of electricity for the fund.

Zhang yesterday told China Daily his company excluded Hubei in the recent tariff increase because the power company already reduced the project fund in the central province in order to increase the on-grid electricity price as early as in late 2003 when its parent group China Three Gorges Project Corp. (CTGPC) listed its major assets in Shanghai.

After the on-grid tariff increase, industry insiders said, the electricity price for consumers will remain unchanged. However, the grid companies will pay less for the project construction fund to the Hubei-based power company, since they may otherwise suffer from the raised tariff.

The increased on-grid prices and the reduced fund actually means the parent CTGPC attempted to boost the profitability of its listed company, Yangtze Power, by lessening part of the group company's income, since the fund eventually goes to CTGPC and the electricity tariffs are collected by the Shanghai-listed subsidiary, said Wang Xiaohui, industry analyst with Beijing-based CITIC Securities.

"The on-grid tariff hike goes along with the company's recent shareholding reform, which was approved by Yangtze Power's shareholders on August 5," Wang said.

According to the industry analyst, Yangtze Power's 2005 annual earnings per share are expected to rise as much as 0.02 yuan (0.24 US cents) to 0.03 yuan (0.37 US cents), benefiting from the on-grid tariff increase.

Wang said the average electricity price hike stands at some 0.02 yuan (0.24 US cents), since the consumers in Hubei, where the tariff remains unchanged, use approximately 70 per cent of the Gezhouba hydro-plant's power generation.

In a move to cut the country's heavy reliance on coal and oil by developing the hydro-power plants, the government should further improve the pricing system for hydro-resource-generated electricity, Yan Zhiyong, deputy-general manager of Beijing-based China Hydro Consultants told the China Power 2005 conference last week.

"The current hydro-produced electricity is priced some 0.1 yuan (1.2 US cents) lower than the coal-generated one, which is not conducive to the rational development of the country's hydro-plant construction," Yan said.

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