A three-tiered progressive pricing system for residential electricity use is to be implemented gradually nationwide. The era of one price fits all will end, as under the new system the more electricity a family uses the higher price it will have to pay.

Piloted in Zhejiang, Fujian and Sichuan provinces as early as 2004, the reform is aimed at bridging the gap between the cost of generation and the price for use.

While coal prices are set freely in the market, power prices are kept low by the government. The cost of producing 1 kilowatt hour of electricity is about 0.80 yuan now, but the price for users is only 0.49 yuan.