context: Beijing city is wedged in a tricky situation - neither raising power prices, nor compromising power supply are appealing options to authorities. These issues could be avoided in the future by liberalising power markets.
A letter, jointly written by 11 coal power firms, was sent to Beijing Municipality City government, asking Beijing to rescind its October to December 2021 direct power supply agreement, reported Sohu on 1 Sep 2021. According to the document, many coal power firms have been operating at a loss with insufficient coal storage due to the continuous rise in coal prices this year, which has affected stable power supply.
Open market competition among 48 coal power firms in the Jing-Jin-Ji area has significantly lowered Beijing's power prices. Coupled with high coal prices, many coal power firms are experiencing losses and are not able to guarantee generation of the agreed amount of power. Given the tightening coal capacity reductions and restrictions on coal imports, the price of coal reached a historic high this year.
The letter to Beijing's municipal government proposes implementing a ‘base price + floating price’ mechanism and renegotiating the city's power supply agreement to allow for price rises and ensure power supply. A report released by China Electricity Council in July 2021 also recommended the linking of power and coal markets for more flexible adjustments of power prices based on upstream market fluctuations.