BEIJING, March 3 -- The government plans to raise electricity prices under a mechanism linking the charges to rising coal costs, the China Securities Journal reported Thursday, quoting an official at top generator Huaneng group.

    The increase would be around 0.01 yuan (US$0.125) per unit, usually one kilowatt hour, the newspaper said.

    In theory, the government has been able to increase power tariffs since the beginning of 2005, to help generators absorb about 70 percent of increases in fuel costs.

    But this would be the first rise since May, even though the coal market has been booming, and the government this year abolished price caps for coal used in generating electricity.

    Earlier this week, top power and coal producers missed a deadline to agree on coal prices for 2006 because the power producers opposed increases they could not pass on to consumers.

    Coal miners such as top player Shenhua Energy Co. and Yanzhou Coal Mining Co. want a 5 to 8 percent rise over last year's prices, while power producers such as Datang International Power Generation Co. and Huadian Power International Corp. are pushing for no change, industry sources said.

    Power companies say higher fuel costs threaten their profits. However, the longer talks drag on, the less likely a significant price increase becomes because global prices for the fuel are expected to weaken, analysts say.

    Despite the deadlock, coal supplies have continued based on last year's prices, ensuring the country's fast-growing economy is not starved of power.

    The energy-policy setting National Development and Reform Commission recently submitted a draft report on the coal industry to the State Council, or Cabinet, which calls for the continued implementation of policies linking coal and power prices, the paper said.

    Officials are also considering changes to the price control system for fuels like gasoline and diesel, but are concerned that higher energy costs might spark inflation or social unrest.

(Source: Shenzhen Daily/Agencies)