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China Reforms Power Markets
May 10, 2002

China, which last year generated 1,478 TWh (Terawatt-hours) of electricity, and consumed 1,454 TWh, is in need of expanding its generation capacity to meet the fast growing needs of the economy. According to forecasts included in the current Five Year Plan capacity will need to reach 390GW by 2005, which is almost 70GW more than the capacity in 2000. To meet these challenges, China plans to accelerate the pace of structural reform in the power sector, in a bid to break up monopolies, improve efficiency, lower costs and optimize the use of resources.

China will separate power plants from power-supply networks, regroup state-owned property, encourage competition among different power plants, adopt a new pricing mechanism, and set up a national power regulatory committee and formulate a set of fair, rational and transparent supervisory regulations.

China will establish four or five national power generation companies, each with a capacity of 30-40 million kw, which will operate independently.

After the regrouping of the power-transmission networks, China will establish a national power network company, comprising five regional network companies in northern, northeastern, northwestern, eastern and central areas.

Meanwhile, an independent south China network company will be set up to operate power transmission networks in Guangdong, Hainan, Yunnan and Guizhou provinces and the Guangxi Zhuang Autonomous Region.

Under the new pricing mechanism, power prices will be divided into four categories, which will consider the costs in power generation, transmission, distribution and sales.

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