BEIJING - China is still facing the challenge of power shortages as summer approaches, despite the central government's efforts to control coal prices and ensure electricity generation, an industry insider said.

China Electricity Council (CEC) statistics show that coal-fired power plants operated by the country's five major power generation groups - China Huaneng Group, China Datang Corp, China Guodian Corp, China Huadian Corp and China Power Investment Corp - lost 12.16 billion yuan ($1.88 billion) in the first five months of this year, 7.86 billion yuan more than the same period in 2010.

In May alone, they lost 1.69 billion yuan.

A senior official from one of the groups who wished to remain anonymous told China Daily that higher electricity prices have not helped power plants much because coal prices increased substantially after the government raised power prices.

The National Development and Reform Commission raised the cost of on-grid electricity in 16 provinces in April by up to 0.026 yuan a kilowatt-hour. Two months later, the commission raised the prices of both on-grid electricity and industrial-use electricity in 15 provinces.

The industry insider said every coal price increase of 25 yuan a ton offsets 0.01 yuan of the electricity price rise.

From early April to June 20, the prices of thermal coal at Qinhuangdao port rose 75 yuan a ton to 840 yuan, according to www.coal.com.cn, an online coal trading website.

The official said coal-fired power plants in his group will keep working on reducing the cost of power generation and increase production efficiency to minimize the losses.

He declined to disclose details of those losses but said that in order to ensure the residential electricity supply in the summer, the company's coal-fired power plants won't stop generating.

He added that hydroelectric generation will help ease the power shortage because of the recent heavy rainfall in South China.

According to the CEC, coal-fired power plants in five major groups lost 1.69 billion yuan in total in May and all the coal-fired power companies in central and northeastern China are suffering losses.

The insider said to resolve the power shortage problem, which happens nearly every year, the government should stop setting the price of electricity and let it be determined by the market.

"The government should raise the electricity price nationally instead of just in a few regions. It didn't control coal prices effectively, either," said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University. "So, the power plants cannot stop losing money in the short term."

"Even though the hydroelectric generating can help to a degree, it cannot solve the power shortage problem," he said.

China Daily