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To ensure that China's economic growth will be properly powered, the power industry must speed up market-oriented reforms to raise its efficiency.

The State Council recently sounded such a clarion call by approving suggestions on deepening the reform of the industry from 2006 to 2010.

As a basic utility, electricity is closely related to both the development of the national economy and to the improvement of people's living standards.

However, for China, the importance of the power sector reform lies not just in meeting its growing demand for electricity. The reform also constitutes a crucial part of the country's long-term efforts to pursue a sustainable growth pattern.

During the 10th five-year period (2000-05), the country was once caught in a serious shortage of power supplies thanks to soaring industrial demand and inadequate increase in generating capacity. Widespread power blackouts in 2004 posed a bottleneck in the rapid growth of many businesses and caused great inconvenience to numerous households.

If the past is any guide, policy-makers should certainly pay more attention to increasing the power supply in line with the national economy's growth prospects.

Though the authorities have vowed to cool down economic growth for industrial restructuring, the Chinese economy is well predicted to stay on the track of fast growth in coming years. Hence, a further increase in electricity consumption is very likely, and more investment to expand generating capacity is needed.

While quenching the country's thirst for electricity, though, a more demanding and urgent task is for the country to set efficiency standards and enforce air pollution standards more rigorously for coal-fired power plants.

Coal fuels two-thirds of China's electricity production, and the country is now second only to the United States in the use of electricity.

The central government is keenly aware of the need for the power industry to boost efficiency reducing costs and improving services. It is a sad fact that waste and inefficiency still contribute considerably to the current need for China to add many new power plants every year.

To enable itself to develop in a stable, healthy, coordinated and safe way, the power sector should step up reforms to improve the industrial structure and change growth patterns.

Yet, to bring into full play the role of electricity prices as an incentive for businesses and households to save energy and protect the environment, a market-oriented pricing reform should take centre stage in the coming reform of the power industry.

That is why the State Council has called for a "unified and open" electricity market, a price mechanism in line with the market economy and a sound market supervision system.

Only when electricity prices reflect supply and demand in the market and include the environmental costs, can both power plants and consumers be motivated to produce and use power efficiently and in an environment-friendly way.

(For more biz stories, please visit Industry Updates)