Price system chills power producers

As winter approaches, how should China's electricity producers expand their output in order to meet the upcoming seasonal surge in demand?

Actually, many electricity producers have little incentive to increase their power output as the country's dysfunctional pricing system erodes their profits.

Coal prices have been hyped up in the domestic market by coal suppliers and continue to climb higher. Meanwhile, the rates electricity producers can charge their customers are set by the government.

Such a price system has greatly hurt the financial performances of power producers and dampened their willingness to beef up their capacity. To solve this problem, authorities should allow power companies to set their own prices in accordance with conditions in the market. If electricity producers could suddenly set rates by themselves, the shortages expected for this coming winter would give these enterprises plenty of room to step up their electricity output along with their profits.

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