In a notice posted on its website (www.ndrc.gov.cn), the National Development and Reform Commission (NDRC) said it would crack down on all illegal pricing activities unearthed during an investigation into the sector.

The NDRC urged coal enterprises to "strengthen self-discipline" when it comes to maintaining price stability.

It said companies should keep contract coal prices with power firms at 2010 levels, and were not permitted to raise prices in any form.

Enterprises found to have violated China's macroeconomic control regulations by driving up prices or selling lower quality coal will be severely punished, the notice added.

China keeps electricity prices under tight control, and its big state-owned utilities have suffered big declines in profits because they have been unable to pass surging coal costs onto consumers.

The country's biggest electricity producer, Huaneng Power  said this week that its earnings in the fourth quarter of 2010 plunged 75 percent.

The problem has raised the spectre of power shortages as China approaches the summer electricity consumption peak.

The NDRC said coal companies should improve coordination with power plants when it came to guaranteeing supplies, adding that they were not permitted to "segment the market" by restricting cross-province deliveries.

A government source told Reuters last week that China was considering raising regional power prices for the first time since late 2009.

The price hikes would be limited to industrial consumers, with the government still reluctant to risk public wrath -- and more inflationary pressure -- by raising household tariffs.