China’s Utilities Cut Energy Production, Defying Beijing

It is a power struggle that is causing a power shortage — one that has begun to slow China’s mighty economic growth engine. Balking at the high price of coal that fuels much of China’s electricity grid, the nation’s state-owned utility companies are defying government economic planners by deliberately reducing the amount of electricity they produce.

The power companies say they face financial ruin if the government continues to tightly limit the prices they can charge customers, even as strong demand is sending coal prices to record levels. The chairwoman of one giant utility, China Power International, recently warned that one-fifth of China’s 436 coal-fired power plants could face bankruptcy if the utilities cannot raise rates. The utilities’ go-slow tactics include curtailing the planned expansion and construction of power plants, and running plants for fewer hours a day. And in a notable act of passive defiance, the power companies have scheduled an unusually large number of plants to close for maintenance this summer — right when air-conditioning season will reach its peak.

So far there have been no public confrontations between Beijing officials and utility executives. But the dispute indicates that China’s unique marriage of market competition and government oversight may be starting to fray after three decades of phenomenal economic success.

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