Chinese Government Raises Rates For Coal-Fired Electricity By 5% - Market Watch

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The National Development and Reform Commission said on its Website that the move would take effect Wednesday, and analysts said more such moves are likely ahead.

"Beijing will raise power rates and fuel prices again this year. The government may also find other ways to support power producers to ensure stable power supply," said Merrill Lynch economist Ting Lu in a research note Tuesday.

Last month, China raised on-grid rates by 5% and froze prices of coal. In June, it raised retail energy prices in response to soaring oil costs.

Because the retail rates won't be hiked for either corporate or household power users, the move will have "almost no direct impact" on producer or consumer inflation, Lu said. The latest move will be "negative for power grids, positive for power producers," he said. "Simply put, power grids' profit will be squeezed."

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