BEIJING, July 26 -- China probably won't raise its electricity prices in the near term, despite repeated requests from major power firms for a rise to cover higher coal costs, a government official said Wednesday.

    This highlights the government's dilemma in making any decision to raise other living costs after high inflation figures driven mainly by food prices.

    The country's five leading power groups, including China Huaneng Group and China Datang Corp, have been seeking higher tariffs as the annual coal contract prices settled early this year exceeded a threshold that would allow a tariff increase.

    "We'll have to watch the market for some time before considering whether to raise power tariffs," Cao Changqing, head of pricing at the National Development and Reform Commission, told a media briefing in Beijing.

    Cao factored in steady spot coal prices in the first half as well as fast-rising profits among power generating firms.

    Under a cost flow-on mechanism instituted in May 2005, power producers are allowed to pass on 70 percent of coal cost increases if fuel prices rise more than five percent over a six-month period.

    China last raised electricity prices in June, 2006. Cao said last year's tariff hike has already helped cover some of the power firms' fuel costs.

    According to a Beijing Times report, citing the China Electricity Council, prices of long-term contract thermal coal this year have increased nine percent from a year ago.

    "A price hike might be hard to bear this year due mainly to inflation concerns," said Cui Yuqin, utility analyst at Everbright Securities Co. "Also power firms are posting handsome first-half results as they generate more electricity."

    "But if you want to raise the tariffs, you'd better do it now because it's unacceptable to raise prices when the peak power-use season ends," said another analyst.

    China's Consumer Price Index rose 3.2 percent in the first half, compared with the government's full-year target of three percent. In June, CPI rose 4.4 percent.

    The government is also under pressure from refiners which have applied for a rise in refined fuel prices as crude rates increase.

    (Source: Shanghai Daily)