A coal-and-power price linkage scheme has been issued by the State Development and Reform Commission recently after the approval of the State Council. Insiders believe the new policy will lead to a round of price adjustment for some coal-fueled power companies in the first quarter of next year.

The plan gives the calculation equations. Coal prices at the end of May this year is the basic reference for the trial of the new system. The average rise of the coal fuel, if it reached above 5 percent within 6 months, is used to decide at what prices the electricity is supplied. Power plants are expected to digest 30 percent of price hike of coal.

Hydropower plants adjust their prices when coal fired power generators make price alterations.

Experts think the program can ease the cost pressure on coal fueled power plants to some extent.

The State Development and Reform Commission also has strengthened the control on coal prices to prevent monopoly. Prices of coal for power generation are subject only to the consultation between sells and buyers. Neither local governments or their functional affiliates are allowed to interfere the pricing process.

Coal enterprises are supposed to give reasonable quotations and should not manipulate coal prices through coalition..

The Commission is entitled to take measures when sharp price fluctuation takes place.

Market is the fundamental factor in the pricing process. coal-fueled power generators to be operational in 2005 and 2006 will create brisk demand for coal. But there is no quick solution to the transportation. As a result, there is still much potential of price hike for coal.

The conference for coal procurement will be kicked off on December 29 in QinHuangdao, Hebei Province.

By People's Daily Online