The electricity grid in southern China on Monday kick-started its market-oriented transformation, becoming the country's third regional power network to introduce more industrial competition after northeast China and east China.

Unlike the previous government-controlled electricity distribution process, market players including grid companies and power generating firms will bid for more competitive prices through long- and short-term contracts, according to the new market-based mechanism.

But at the preliminary stage of converting electricity distribution into a more market run process, a low electricity volume will be involved in relation to the total power generation capacity across the southern China region, which includes the provinces of Guangdong, Yunan,Guizhou and the Guangxi Zhuang Autonomous Region.

The island province of Hainan is expected to connect with the main southern grid next year, and will also be involved in the market competition by then, said sources from the State Electricity Regulatory Commission of China (SERC) on Monday.

At the moment, only 14 coal-fired power plants in the region have participated in the market-based system, representing 17 percent of the total 79.6 GW (gigawatts) generation capacity in southern China.

The four provincial grid companies will then negotiate with the 14 power producers over possible deals, the SERC said in a statement.

"The move will have a far-reaching influence in pushing ahead the market-oriented reform of the country's electricity industry," Shi Yubo, vice chairman of SERC said at a conference in Guangzhou, south China's Guangdong Province.

The region has followed suit after the regional grids in northeast China and east China took the initiative of introducing market-oriented reforms across the electricity sector that was put in place in the first half of last year, Chang Jianping, deputy director of SERC's power market regulation unit, told China Daily.

(China Daily November 22, 2005)