26 may 2011

[See 4C Note to part I of this article for a guide to the highlighted passages.]

China’s Utilities Cut Energy Production, Defying Beijing Part III

By KEITH BRADSHER [url text="New York Times"][/url], May 24, 2011

But Chinese regulators have let electricity prices climb only 2.5 percent this spring. Residential users in China’s cities pay 8.2 cents a kilowatt-hour. That compares to a national average of 11 cents in the United States and 15 cents in the heavily urban mid-Atlantic region. Chinese industrial users in cities are supposed to pay 12 cents a kilowatt-hour, although politically connected businesses receive discounts; the average industrial rate in the United States is 7 cents, and 9 cents in the mid-Atlantic region.

Big power generators like Huaneng buy nearly half their coal on the spot market and the rest on long-term contracts with prices that rise more slowly.

The government has put pressure on China’s coal mines, also largely state-owned, to continue supplying power companies with coal at below-market prices under long-term contracts. But the mines, which are also profit-oriented operations, have responded with their own form of passive resistance — by sending their cheapest, lowest-quality coal with the most polluting sulfur.

As a result, many power plants are now paying penalties to yet another arm of the government — environmental regulators — for burning the sulfur-spewing coal. That has further added to the utilities’ cost of doing business, said Howard Au, the chief executive of Petrocom Energy, a Hong Kong company that builds coal-blending facilities.

Trying to help utilities reduce those environmentally and financially costly emissions, Petrocom has built a series of gray silos and red conveyor belts at Lianyungang port in northern China to dilute high-sulfur Chinese coal with low-sulfur imported coal.

Blackouts appear to be the worst in smaller towns like Yiyang here in Hunan, one of China’s largest and most populous provinces. The power shortages are threatening to curb the explosive growth the province has experienced since the opening in late 2009 of a high-speed electric train link to prosperous Guangdong province to the south, which helped companies tap Hunan’s cheaper land and labor force.

In rationing electricity, Hunan officials have given priority to big cities like Changsha, the provincial capital. Even there, though, industrial districts are blacked out one day in three.

In Yiyang, meanwhile, multiday blackouts have ruined a tiny restaurant run by Xu Zhanyun, 48, who now must cook meals over lumps of coal instead of his electric stove. “I have so much food in my refrigerators that all went bad,” he said.

There is running water only every other day because the pumping station requires electricity. And so he must haul water from a well — as he did as a boy, before China’s economy surged.

In other cities, factories require employees to work at odd hours when electricity is available.

“They shut down the electricity for a day every three days,” said Jin Jianping, manager of an umbrella factory in Ningbo, in east-central China. “We just arrange night shifts for everyone.”

Michael Wines contributed reporting from Wenzhou, China, and Jonathan Kaiman contributed research from Beijing.

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