China's electricity output grew 8.3 percent in June from a year earlier, official data showed on Friday, the lowest normalised rate in over 6 years as it grapples with a deepening supply crisis caused by a shortage of coal.

Excluding growth rates in January and February, which are usually skewed by the long Chinese New Year holiday that varies between the two months, the June output growth is the slowest since early 2002, according to data from Reuters EcoWin.

China, the world's second-largest electricity user, generated 293.4 billion kilowatt hours (KWH) of electricity in June, while output in the first half of 2008 rose 12.9 percent on year, data from the National Bureau of Statistics (NBS) showed.

China is facing its worst summer power deficit since 2004, when a crippling shortage caused oil demand to spike and forced the closure of numerous metals smelters.

China has officially forecast a modest peak power supply shortfall of 10 gigawatts for this summer, but its provinces are forecasting nearly triple that level at close to 30 GW, or 4.2 percent of the country's total installed capacity. Over a dozen provinces have already begun rationing supplies.

Unlike the crunch in the summer of 2004, caused by a shortage of power plants, the squeeze this time has been due to a shortage of coal and a reluctance by generators to stockpile coal in the face of capped tariffs that have cut into profit margins.

Output from thermal power plants, supplying some 80 percent of the country's total, rose 6.8 percent in June from the year-ago period at 230.6 billion KWH, the data showed. 

That was the lowest since October 2005, exclding fluctuations around Lunar New Year breaks during the period.

Though analysts cautioned that one month's data may not be adequately convincing given the impact of weather or the change in number of weekends that may affect the growth rate, they agree that the crunch this summer would be more severe than expected.

"The power shortages will be quite serious throughout the summer. Coal price has continued to rise despite the government cap," said Stephen Oldfield, UBS' Hong Kong-based power analyst.

"The increase on on-grid tariffs appears not working and power companies will continue to see finanacial challenges."

At least 14 provinces are now experiencing power rationing that has forced many electricity-guzzler metal firms like Chalco, Shandong Nanshan Group (600219.SS: Quote, Profile, Research) to cut output to stem losses and lift declining metal prices.

China raised retail power prices by 0.025 yuan per KWH, or barely 5 percent on June 20, the first increase in two years, followed by a modest 0.02 yuan increase in on-grid rates from July. Beijing also ordered a freeze on thermal coal price.

The government did not provide an percentage change for the on-grid rate rise but industry officials estimated that the growth lags far behind the surge in coal prices.

The squeeze between rising coal price and capped tariffs is pushing generators like Huaneng Power International (0902.HK: Quote, Profile, Research) and Datang Internaitonal (0991.HK: Quote, Profile, Research) into the red.

Last month, the hydropower sector generated 54.9 billion KWH of electricity, up 16.2 percent from a year earlier, slower than the previous two months when growth was about 28 percent.

Contributing to the power shortage are falling water levels in reservoirs, including in the earthquake-hit southwest Sichuan province, as well as hotter weather, which has boosted demand.