The June 1 price cut will be the third since last May and will send the overall price plunging to 0.7155 yuan (US$0.086) per kilowatt hour (kwh) -- an average drop of 0.05 yuan (US$0.006) for every kwh of electricity.

"The new electricity prices are influenced by such factors as a lower price for electricity that the city buys from the provincial power grids, a decreased electricity transmission loss, the removal of payment for the principal and payment of interest on the construction of local power grids construction, and a cut in the profits of power plants," said Nie Zhenguang, director of the Shenzhen price bureau.

The price cut will send net profits of power plants spiraling downwards to just 0.008 yuan (0.1 US cents) from a previous level of 0.013 yuan (0.16 US cents) for generating every kwh of electricity.

According to Vice-Mayor Wang Suiming, the new electricity prices will cut the city's annual revenue by 1.3 billion yuan (US$157 million) but form part of the city's commitment to a better investment environment by reducing the production costs of investors.

"A large-scale enterprise can cut its expenditure on electricity by up to 10 million yuan (US$1.2 million) per year by using electricity rationally under the new pricing system," said Wang.

To encourage proper and rational electricity consumption, electricity prices between 11pm-7am have been adjusted to be around half those of the peak period.

Residents will also benefit from the new electricity prices.

Statistics show residents and administrative units contribute around 16 per cent of the city's annual 20 billion kwh of electricity consumption. Electricity prices will remain higher than those in Shanghai and most cities on the Yangtze River Delta, which are the major economic engines of China.

"The Shenzhen municipal government is investigating a further decease in its electricity prices," said an official from the price bureau.

(China Daily May 29, 2003)