The government has begun closing provincial power bureaus as part of a strategy to loosen its hold on the energy sector, according to state media.

So far, 27 power bureaus have handed over their administrative functions to provincial trade and economic commissions, the China Daily Business Weekly quoted Shi Yubo, head of the electric power department at the State Economic and Trade Commission, as saying.

Four bureaus that are left are expected to do the same before the end of the year.

"The reform is a strategic move to gradually withdraw the government's control over the power sector," the paper reported, citing observers.

Consumers could expect average price reductions of 20 per cent if the energy sector is opened to full competition, the paper added.

"The cost saved from the competition will be passed on to consumers, especially those enterprises with high power consumption," Mr Shi was quoted as saying.

The latest developments in the power sector follow reforms in other industries previously under tight government control, such as telecommunications, where competition is now allowed.

The next step in the reform process will be to make power companies more efficient by giving them better access to funding, the paper said.

It reported that the government is trying to make it easier for power companies to go public and to attract foreign investment.

Early this year the government began a series of experiments to separate power generation from transmission and distribution.

In the experiments, taking place in Shanghai and five eastern and northeastern provinces, power generators must compete with each other for access to power transmission grids.

The pilot project has already led to cuts in the price of power for local consumers and will be extended to other provinces next year, according to previous media reports.

(South China Morning Post)