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A few days ago, news from the Electricity Regulatory Commission stated that due to insufficient supply of thermal coal, 13 provincial electricity grids have already implemented power cuts to varying degrees. There is another theory circulating, suggesting that the power shortage is caused by the electricity sector forcing an increase in prices. Data collected over the past month or so by Li Chaolin, an expert from the China Coal Market Network, leads him to believe that it is indeed a shortage in the effective supply of coal that has caused this power shortage, whereas the previous power shortage in 2004 was caused by insufficient electricity generation by power plants. Over a month ago, Li Chaolin noticed that some coal companies in coal-producing provinces such as Shanxi and Henan no longer had any coal in stock, while coal reserves in areas that consume coal were also extremely limited; some power plants were even forced to shut down. Li Chaolin said that the reason for the increased coal shortage is the continuous rise in the country’s demand for thermal coal from the end of last year to the beginning of this year. In December 2007 alone, the average daily consumption of thermal coal across the country reached 2.02 million tons, with a peak of 2.24 million tons on a single day. A few days in January of this year, the daily consumption of thermal coal remained above 2 million tons, **higher than in previous years, while the effective supply of thermal coal could not keep up. The most typical example is Henan, a major coal-producing province. Its economy has been developing rapidly; recently, the electricity demand across the province has continued to rise sharply. The supply of thermal coal in the province remains strained, with inventory levels showing a clear downward trend. As a result, 1.36 million kilowatts of capacity have had to be shut down due to a lack of coal ； The number of unplanned outages of the generator set has increased significantly. Affected by these factors, varying degrees of electricity supply shortages have occurred in the central and eastern parts of Henan Province, southern Henan, Jiaozuo, and Xinxiang areas. Since December last year, maintenance work on large coal mines in Shaanxi Province and the suspension of operations for small coal mines in the Weinan area have led to a decline in raw coal production and a shortage of thermal coal. Some power plants are at risk of shutting down due to a lack of coal, putting significant pressure on the safe operation of the power grid; as a result, an orange-level II power supply contingency plan has been activated in the area. Xuzhou Port Area is an important hub for the transshipment and trading of coal. Coal from provinces and regions such as Shanxi, Shaanxi, Henan, Jiangsu, Shandong, and Gansu is transferred there before being sent to areas like Jiangsu, Shanghai, and Zhejiang. On January 9, 2008, Xuzhou Port Group had 1.02 million tons of coal in stock, which was more than 30% less than the normal stock level of 1.5 million tons. According to Sun Bo from the Coal Market Information Department of Jiangsu Province, due to low inventory levels in the port areas and a tight supply of coal, some power plants downstream have faced frequent shortages of coal, to the point where some of these plants were forced to shut down due to lack of fuel. The shortage of thermal coal has also led some major coal-producing provinces to restrict the export of coal. A recent directive issued by a certain province requires that, from November 28, 2007, to February 5 of this year, coal must not be exported from the province, and temporary unified control is imposed on coal production and sales in the major coal-producing cities and enterprises. According to calculations by this province, in 2008 the total demand for thermal coal for all power plants in the province was 44 million tons. It was estimated that only 35.5 million tons could be made available, resulting in a shortfall of 8.5 million tons. Even after reducing the amount of electricity sent to other areas, the shortfall would still be between 5 and 6 million tons, affecting power generation by around 8 billion kWh. Yesterday, the National Development and Reform Commission and other relevant departments issued directives requiring coal-producing provinces to overcome local protectionism, to give equal importance to ensuring supply both within and outside the province. It is strictly forbidden to divide up the market or restrict the export of coal, as well as to impose various fees illegally in addition to the coal price. All types of coal production and operation enterprises are strictly prohibited from driving up prices or raising them arbitrarily taking advantage of the tight supply of coal; otherwise, they will be dealt with in accordance with the law. Although he disagreed with the claim that the power sector forced an increase in prices, Li Chaolin said that since the third quarter of last year, coal prices have continued to rise. In particular, at the end of 2007, when the ordering contracts related to coal production, transportation, and demand across the country were finalized in Xianghe, Hebei, coal prices increased by around 10%, resulting in a significant price rise in coal across the country at roughly the same time and to a similar extent. Li Chaolin believes that rising prices of thermal coal should not be used as a reason to demand higher electricity prices; after all, power generation companies have made great efforts to reduce emissions and save energy recently, and the costs saved in this regard should be sufficient to offset the increases in costs resulting from rising coal prices.