It will also ease acute peaking problems by constructing a pumped storage plant (4 x 250 MW) in Yixing and improve the generation mix that would create the conditions for more flexible dispatch and improved supply reliability, an essential requirement for well functioning competitive markets. The Jiangsu power grid faced major problems to meet peak demand during the summer of 2002 because of the very high growth of commercial and household demand.

This project is in line with the strategy developed in the World Bank?s Country Assistance Strategy (CAS), as well as the government?s strategy which aims to gradually transform the power sector of provincial and regional systems into a diversely owned market based industry through comprehensive restructuring, and to create a comprehensive modern regulatory framework for the sector. ?This project is expected to boost the economic development of Jiangsu Province by mitigating and eliminating institutional and technical constraints that have prevented the power system from expanding and operating efficiently,? says World Bank Task Manager for the project Zhao Jianping. ?The project also contributes to widespread state owned enterprise and governance reform as well as development of the financial sector.?

Other benefits expected from the project include:

• Implementation of the government's new power sector reform strategy will benefit from international experience in power sector restructuring and the development of power markets.

• The pioneering work related to the commercialization of the transmission and distribution segment in Jiangsu Province will provide valuable inputs to the central government decision-making process in developing a strategy to separate and commercialize the transmission and distribution business.

• The legal and commercial arrangements defining the relationship between the pumped storage plant and the power market are appropriate in order to maximize the benefits of the plant to the system.

• Capacity building in areas such as the technical design, construction practices and equipment selection for the pumped storage hydro plant will be in accordance with leading international practice and standards.

• The on-going policy dialogue to address the institutional aspects of wholesale electricity pricing and transmission pricing is successfully implemented in the major power systems that are likely to serve as models for other regions and provinces.

• The piloting of consumer direct participation in Jiangsu will provide a key input to the central government in formulating restructuring strategy to create competitive markets with multiple buyers.

(China.org.cn March 21, 2003)