(Bloomberg) -- Natural gas distributors in Chinese cities are likely to raise prices for households as the government moves to support the companies by insisting they pass on more of the costs of imported fuel. 

The National Development and Reform Commission, the country’s top economic planner, opened discussions in recent months with local authorities and major gas distributors to request they remove fixed household price caps by September, according to people with knowledge of the matter. 

Removing curbs will probably lead to higher costs for residential gas consumers, said the people, who requested anonymity to discuss private details. The changes will also impact industrial consumers, who’ve previous paid higher rates and will benefit as differing tariffs charged to households and businesses are abandoned in favor of market-based pricing, according to the people.

Distributors have typically had to supply to households at fixed rates in each city and pay market prices for the majority of their fuel, meaning profits were eroded as the cost of imported liquefied natural gas surged following Russia’s invasion of Ukraine.

The NDRC did not immediately respond to a request for comment.

China’s government began easing rules last year, allowing more frequent updates to fixed rates for industrial or residential consumers. That helped to support earnings last year for gas distributors including ENN Energy Holdings Ltd., Kunlun Energy Co. Ltd. and China Resources Gas. 

Officials aim to now accelerate those reforms and distributors will need to report to local authorities both the costs paid to acquire gas from domestic suppliers or overseas, and their selling prices, according to the people.

Changes to pricing rules would make it more attractive for the firms to import additional LNG, as the low domestic fixed rates haven’t provided an incentive for companies to stock-up on supplies.

China’s LNG imports lagged behind a 2021 peak last year with the distributors reluctant to buy expensive spot cargoes. In some cases, supply was diverted from industrial gas users to ensure there was sufficient fuel for households during the coldest winter months.

The spread between spot LNG prices and China’s downstream domestic gas rates remains key to determining whether ENN makes additional purchases of prompt supply, Chief Executive Officer Zhang Yuying said at a briefing last month.

Growth in China’s overall gas demand is forecast to slow this year to about 6.1%, according to China National Petroleum Corp., the nation’s largest supplier of the fuel.

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