By Chris Oliver, MarketWatch

HONG KONG (MarketWatch) — Chinese authorities downplayed the capacity of the Three Gorges Dam to discharge heavy amounts of water to provide relief to areas affected by the worst drought in inner and south China in 50 years, warning that the water levels within the dam itself have fallen to levels that may soon make cut backs necessary, according to Chinese media reports Friday.

The water level within the dam is currently around 152 meters, having dropped by about 2 meters in the past week, according to a China Daily report Friday, which cited figures given the official Xinhua news agency Thursday.

Authorities began discharging more water to the middle and lower reaches of the Yangtze River around May 20, boosting the daily discharge rate to 200 million cubic meters. However, the dam will need to cut back the flow rate June 10, when it’s projected that the water level will get too low unless rains compensate, the report said.

Engineers cited in the reports said it was envisioned that the water level within the dam would fluctuate about 30 meters each year, rising to high point of 175 meters at the height of the summer flood season and dropping to lows before the ensuing rainy season.

The ongoing drought has raised concerns that China may suffer rolling blackouts this summer as hydropower plants shut down or operate at reduced rates because of low water levels.

Xinhua reported earlier this week that power shortages are expected in 26 province and regions this summer, suggesting what would shape up as the most severe shortages since 2004.

Electricity generated from hydropower was down in April from the prior month and accounted for 11% of China’s total power production, according to figure released Friday by UOB KayHian.

The brokerage said coal prices are likely to rise as China turns to coal-fired power plants to help cover the shortfall.

Chris Oliver is MarketWatch’s Asia bureau chief, based in Hong Kong.

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