China to Allow Greater Fluctuation of Coal-Fired Power Prices

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By Clarence Leong and Yongchang Chin

Beijing is set to allow greater fluctuations in coal-fired electricity prices in a move to liberalize the country’s power market amid an ongoing energy crunch.

Under the reforms, prices of coal-fired power can rise or fall by up to 20% from a benchmark level based off existing local prices. That compares with the current upper limit of 10% and lower limit of 15%, according to a notice from the National Development and Reform Commission on Tuesday. The 20% upper limit won’t apply to industries with high energy consumption.

The new measures, which will come into effect on Oct. 15, will let the market have a “decisive effect” on resource allocation, while ensuring stable power supply and price stability for households and the agricultural sector, the state economic planner said.

The NDRC is also asking local governments to push for all industrial and commercial users to enter the electricity market so that they would purchase power at market prices.

Regulation of the coal-fired power market will be strengthened to prevent price manipulation and monopolistic practices, it added.

This followed a statement from China’s State Council on Friday saying it would introduce market-oriented reforms in the country’s coal and power markets.

China is facing an energy shortage due to a lack of natural gas and coal, exacerbated by heavy rain and flooding in the coal-producing Shanxi region. Supplies of coal, which generates close to 60% of China’s electricity, have also been hurt by the government’s efforts to reduce carbon emissions.

Chinese thermal coal prices on the Zhengzhou Exchange were last at 1,358.2 yuan ($210.55) a ton, more than double from a year ago. Newcastle coal was last $244.5 a ton, more than four times from a year ago.

Write to Clarence Leong at clarence.leong@wsj.com and Yongchang Chin at yongchang.chin@wsj.com

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