China's government has given the green light to a plan to deregulate the country's electricity-distribution monopoly. The plan would separate transmission and generation activities and establish two grid companies by splitting the State Power Corp., which has 1.38 million employees.

Chinese authorities say Southern Power would operate the grids of the Guangdong, Yunnan, Guizhou, Hainan and Guangxi regions in southern China, while State Power Grid, the second company, would cover the grid in all other regions.

Under the plan, three and possibly all four companies chosen to run the transmission side would remain subsidiaries of the State Power Corp.

SP Power Generation, the third generating company, will be formed from the State Power Corp.'s facilities in northeast China, while the makeup of Guohua Power Generation, the fourth company, is not yet clear.

Currently, the main competition to the State Power Corp. and its subsidiaries, which control just under half the country's capacity, comes from a large number of local and provincial power stations that provide less expensive but more polluting power. The Chinese government hopes units of the new deregulated systems will buy the smaller providers.
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