Power plants Urged to Invest in Coal Sector

China's electricity regulator has advised major power companies to merge with or acquire coal producers and transporters to help stabilize costs and supplies.

Utilities could slow the expansion of their thermal-power capacity and instead invest in coal transport firms and mines, Zou Yiqiao, director of the price and financial supervision department of the State electricity Regulatory Commission (SERC), was quoted as saying by Shanghai Securities News on Wednesday.

Zou suggested that the government would allow power costs to reflect coal prices when the timing was appropriate. A more rational relationship between coal and electricity prices would help ensure sustainable industry development and adequate power supply, which was critical for the economy and living standards, he said.

The government froze electricity prices to prevent rising coal costs from flowing through to end users, but soaring coal prices forced many power plants to run at a loss.

Among 4,773 large-capacity power plants, almost 42 percent recorded a loss in the first two months of 2008, or 6.35 percentage points more than a year earlier, a report by SERC said. The losses totaled 13.79 billion yuan (1.97 billion U.S. dollars), more than triple the year-earlier figure.

Amid rising coal costs, economic planners are attempting to use other means to boost electricity generation by emphasizing renewables. The National Development and Reform Commission (NDRC) on Tuesday announced a subsidy plan, under which methane-to-electricity plants will get 0.1 yuan per kilowatt hour.