The State Electricity Regulatory Commission hopes the pioneer scheme in Northeast China and East China could pave the way towards a competitive national market by forcing energy companies to reduce production costs.

In the past, power prices were distorted because a State monopoly, which controlled half of the nation's power plants and almost all its grids, tended to buy power off its own plants rather than cheaper alternatives.

Chai Songyue, chairman of the commission, Tuesday also hinted at a news briefing that the government is considering slowing down the building boom in power plants, the paper said.

Chai's comments follow a recent investment spree by the biggest five power firms to set up generating plants across the nation.

In Southwest China's Chongqing Municipality alone, three of the big five -- China Power Investment, Huaneng Group and Datang Power Group -- vowed to spend a total of 24 billion yuan (US$2.9 billion) in establishing new plants or expanding generating capacity.

The rivalry was expected when the government broke up the State Power Corp of China's monopoly last December. Five generating firms -- Huaneng Group, Huadian Power, Guodian Power, Datang Power Group and China Power Investment Company -- were founded in its place. The government hopes the newly created big five firms will boost competition in the sector.

But Chai indicated that the push to develop new plants should be controlled.

The government should optimize the location of power plants to make full use of resources and of existing power grids, he said.

Chai's commission, which was officially established last Friday, is the first regulatory commission in the public utilities sector. Analysts believe the commission will eventually grow into an umbrella body regulating oil, gas and water as well as power.

Another commission vice-chairman, Shao Bingren, said China overall had a balanced supply of power despite reports of sporadic blackouts in sixteen provinces and autonomous regions since late last year, partly due to strong economic growth and rising coal prices.

To solve the local shortages, the commission will distribute electricity from energy-rich to energy-poor regions.

The government has also adjusted its investment plan to build more generating plants to ease the shortage. It plans to add generating capacity of 25 million kilowatts a year.

(China Daily March 26, 2003)