In spite of the various emergency measures local governments have tried, the lack of a smart pricing system is still blinding the nation's policy-makers from finding a long-term solution to this burning issue.

A recent news item really shocked me. It said that Yiwu, a booming city in Zhejiang Province of East China had ordered all its 40,000-odd industrial enterprises to unplug from the electrical grid from July 24 for 17 days.

Local business leaders began crying they'd suffer even greater losses than last year when they were hit by the SARS (severe acute respiratory syndrome) outbreak.

Thanks to government priority given to civic uses of electricity, city dwellers have only had a taste of the inconvenient brownouts, though most of us actually have no idea of just how much power shortages will cost.

A caustic comparison made by a Yiwu businessperson provides a vivid depiction of the tip of this dangerous iceberg.

The SARS outbreak last year - an unforgettable memory for the nation - compelled the country to go all out against a new and deadly disease with a thorough review of the nation's medical system.

But what about the power shortage problem which, in terms of economic consequences, is no less serious than the SARS epidemic? Where is the hue and cry to combat the power shortages?

Twenty-four Chinese provinces and municipalities have imposed power brownouts so far this year.

Not that local governments have failed to come up with stopgap measures.

For instance, on Wednesday, Beijing just initiated a yellow-orange-red alert system to inform citizens of the extent to which the city's power supply will fall short the next day.

A nice idea, in a sense. Such a not-so-early warning system can urge Beijingers to look to their current electricity consumption when power supplies are tight.

But defects of the red alert system are also obvious in the absence of a smart power pricing system that would be able to raise peak-hour power prices to a prohibitive level.

Though energy-saving awareness does affect consumer behaviour, there is little reason to expect that Beijingers will be much more power thrifty than dwellers in other cities, that's as long as they enjoy average power prices, if not lower, or at least no higher than others do.

Another obstacle is an implicit yet common view among Beijingers that the country's capital is just too important to be under-powered, though in fact, part of it already experienced a 47-minute brownout in July.

We can only hope that the toothless red alert system, by repetition, manages to drive some sense of crisis home over time.

Many other places like Yiwu surely don't have the good fortune of Beijing which, as the capital, enjoys more privileges in using electricity from the national grid.

It is reported that Yiwu's power demands almost doubled last year and have grown as fast this year due to robust industrial growth.

Yet the quota of electricity supply virtually remains the same.

Caught between climbing civic demand and soaring industrial needs, local governments usually have no choice but to sacrifice the latter.

Increasingly frequent brownouts have driven both local governments and businesses to take countermeasures.

To save local economic growth from the havoc created by power shortages, many local governments have rushed to establish local power stations.

To minimize their losses caused by power cuts, local enterprises have bought electrical generators to keep their workshops running.

Additional costs imposed on these enterprises are one problem. Yet, the potential consequences of local governments' efforts to construct additional power stations are another much more severe problem the country must promptly deal with.

While local governments speed up their efforts to expand generating capacity, there are already predication that the country's overall electricity supply might exceed market demand by 2007.

The current power shortages, to a large extent, should be attributed to insufficient power infrastructure investment years ago. Slack demand back then had eroded profit margins.

A similar situation that exacerbates fluctuations in the economy must not be allowed to occur again.

Therefore, clear thinking now is a matter of urgency.

Quenching the present power thirst simply by increasing supply must be fundamentally challenged.

A key reason why local governments are enthusiastic about building more power stations is because the costs to the environment and health impacts have not been included in either their decision-making or power prices, especially for those coal-fueled power stations. So even with a relatively low power price, power stations still can make money as long as demand is high. The strong growth of industrial demand for electricity across the country, in turn, provides a cheap current power supply.

But the country can no longer afford such ignorance of environmental and health impacts, pressing questions for which we need answers.

For enterprises, relatively higher power prices will increase production costs, but that still seems a much better option than the brownouts Yiwu businesses are suffering.

To effectively rein in excessive growth of power demands, a smart pricing system is indispensable. Only a stiff price ladder will persuade mass power consumers to aggressively control the amounts of electricity they consume while raising the efficiency of power use.

True, it will take a fairly long period for enterprises to adjust to energy-saving production approaches given the costs of doing so.

Introducing a smart power pricing system will impose different burdens on various groups.

But if the policy-makers acknowledge the necessity of adopting such a pricing system as a long-term solution, it should be started as early as possible.

At present, Yiwu's enterprises are still waiting for news if the power cuts will continue. Maybe they will have to live at the mercy of the elements this time.

Yet it is definitely a duty of the country's policy-makers to prevent such cases by crafting a far-sighted, market-oriented guideline for power development.

(China Daily August 13, 2004)