The state-owned China Resources Power Holdings Co. (CRPHC) has temporarily hiked electricity prices in Jiangsu, Guangdong and Henan provinces by an average of 7 percent, the Hong Kong Economic Journal reported July 3. The report comes two days after Beijing’s recently endorsed fuel price increases took effect, so this increase is not in violation of central government orders — though officially, approval was only granted for an approximate 5 percent increase.

CRPHC CEO Wang Xiaobin said the move is meant to minimize the chances of interruption for electricity supplies during the summer months, when Chinese demand typically peaks — a trend that has led to electricity blackouts and brownouts throughout the country for each of the last five years. Spot shortages across China have grown more frequent for more than a year now as market prices for electricity have been set at below-market clearing rates.

Beijing was trying to postpone any electricity price increases until after the Olympics for fear of the social unrest higher electricity costs could trigger. This means that almost the entire burden of rising coal prices has fallen on the shoulders of Chinese power generators and distributors, whose profit lines and share prices have been adversely affected as a result. But with the Olympics just weeks away, guaranteeing continued electricity supplies (especially in key cities like Beijing) has become the government’s highest priority. Beijing is unable to ramp up electricity supplies, so other than freezing coal prices (which it also just did), Beijing had only one option left: cutting demand. And the only way to do that is to either raise prices or impose rationing. Beijing opted for price hikes.

This first round of electricity price hikes will not be enough to eliminate all brownouts, but it should be enough to skim off some marginal peak-hour users (e.g., factories that can reschedule their runs to off-peak hours, or households that leave lights or air conditioning on all day) to lessen the number of brownouts occurring during peak periods. It should also help to lower, if only slightly, the losses that power-generating companies have been suffering as a result of rising coal prices.

Furthermore, a number of provinces reportedly have been given permission to charge summer peak-hour surcharges. The three provinces undergoing price hikes were not included in the unverified list of eight provinces released June 13 that a government source provided to Reuters. (That list included Shandong, Beijing, Hebei, Hunan, Zhejiang, Fujian, Tianjin and Chongqing.) But these three provinces could have been added to the list since its release, especially if shortages were to result if they were not allowed to impose surcharges. And if those three provinces have not been granted official permission to charge peak-hour surcharges, then CRPHC is probably fudging the prices a bit — as plenty of other state enterprises likely will do with other already-approved fuel price hikes in coming months. But with the electricity price hikes at 2 percent over the official allowance, Beijing is unlikely to put an end to CRPHC’s attempt to deal with its summer shortage issues.