Chinese electricity producers can pass on to the country's two grid operators additional costs incurred by increases in the price of thermal coal, the State Council, or cabinet, said in a statement on its web portal Wednesday.

Thermal-coal power producers can now pass on 90% of any pricing change if the change is more than 5%, compared with 70% previously.

Grid operators buy electricity from producers by paying a wholesale price, known as the on-grid tariff, which is determined by the government. The government also sets retail prices, which it last adjusted in November 2011.

The cabinet said thermal coal contract prices are currently aligned with spot coal contract prices, and so it doesn't expect an increase in the on-grid tariff. It said it will review prices on an annual basis.

The five largest power producers are China Datang Corp., China Guodian Corp., China Huadian Corp., China Huaneng Group and China Power Investment Corp.; the two grid operators are State Grid Corp. and China Southern Power Grid Corp.

The government this year has introduced a number of price reforms to take advantage of low coal prices, and to ease the burden of the reforms on producers, grid operators and consumers. China's spot price for benchmark thermal coal--the Bohai-Rim Steam-Coal Price Index--averaged 635 yuan ($102) a metric ton in the week to Dec. 19, about 23% lower than in the same period a year earlier.

The reforms include a progressive electricity pricing system for residential users, which from July raised prices for the heaviest users. And last week, the government said it would on Jan. 1 remove its limit on how much thermal coal contract prices can rise between power producers and coal suppliers--a temporary measure in place since November 2011. It also said it will remove its cap on the price of benchmark spot thermal coal, but said it would continue to closely monitor prices.

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