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Shanghai's businesses and industries will be paying 10 percent more for coal gas starting today -- the first step in a pricing reform plan meant to encourage more efficient use of the energy resource.

Coal-gas prices for commercial customers will also jump in the fourth quarter next year, bringing the overall increase to 20 percent, the Shanghai Price Bureau said over the weekend.

Adjustments for residential users will be announced in the second half of next year.

Under today's rate hike, non-residential customers will pay an additional 0.2 yuan (2.56 US cents) for every cubic meter of coal gas, bringing the base fee to 1.65 yuan.

In October 2007, base prices will rise to 1.8 yuan.

A seasonal pricing mechanism, designed to discourage energy use during peak periods, will remain in effect.

From December to March, rates are raised 0.2 yuan above base rates, bringing today's total coal-gas charges to 1.85 yuan per cubic meter.

Public primary and middle schools, college and university canteens and bath houses, military units and non-profit homes for the elderly are exempt from the price hike.

Retail prices for non-residential gas users will be updated once every year to track supply.

"The additional charge will be used to counter increased production costs of gas suppliers, and city government will form a special supervision team to oversee the matter," the Shanghai Municipal Information Office said in a statement.

It noted that low-income residents will be given special consideration during deliberations on possible price adjustments for residential customers next year.

The Shanghai Gas Group Co proposed in a public hearing in mid-September that residential rates for coal gas and natural gas be increased by at least 19 percent. It said the rising cost of coal had put great pressure on gas production, and the increasing demand for natural gas would result in a supply shortfall.

The gas company suggested a residential pricing system based on a family's annual consumption. The more gas a family burns, the higher the rate would be.

Shanghai had more than 2 million coal gas users, 2.2 million natural gas customers and 2.5 million liquefied gas customers as of September.

(Shanghai Daily December 11, 2006)