The National Development and Reform Commission ordered to raise retail electricity prices, the first hike in more than a year, to cool buoyant demand and boost power generation as the nation battles with a severe power shortfall.

As of June 1, power prices for industrial and agricultural users in 15 provinces and municipalities increased 16.7 yuan ($2.58) per megawatt-hour. The prices for residential users remain unchanged.

As soaring coal prices eat into their profits, many thermal power generating companies have curtailed operations, exacerbating power shortages ailing parts of China.

China witnessed the worst power shortage in decades in 2004, but the State Grid, the country's leading power distributor, said this year might prove worse.

Shuai Junqing, Deputy General Manager of the State Grid, said China may face power shortages of up to 40 million kw this summer, due to strained coal supplies' insufficient power generation and grid transmission problems.

The electricity price hike will be an incentive for power generators to restart their idled machines and help soothe the hunger for power, said Han Xiaoping, CIO of China5e.com, an energy information website.

But it may not be enough to recoup losses of the generators given rising coal costs this year, he said.

The steam coal prices at Qinhuangdao Port, an industry benchmark in the country, have climbed at least 6 percent so far this year.

Lin Boqiang, Director of the China Center for Energy Economics Research at Xiamen University, said the move has no direct impact on consumer inflation, but is likely to push up industrial costs and feed into the producer price index.