Shanxi Province's Duanwan Coal Chemical Co., in Shouyang County, is a coal mine that has operated since 1958. The firm, with a current annual output of nearly 1.5 million tons, is a joint-stock company. In November 2006, the company entered into partnership with Jizhong Energy Group Co. Ltd., a large state-owned energy firm with total assets of nearly 30 billion yuan ($4.4 billion). Thus, Duanwan Coal Chemical Co. emerged from an ordinary coal mine into a modern coal conglomerate. In 2010, its annual output will reach 4.5 million tons, tripling current production. The company's annual sales revenue will be 1.5 billion yuan ($219.6 million).

Non-state players

China's energy industry is dominated by state-owned enterprises, which are getting bigger and bigger, according to industrial experts. This has given rise to fundamental problems in the energy industry. Increasing private enterprise and foreign capital shares in the energy sector is important to improving energy efficiency, yet how to encourage those non-state players to enter the industry has proven to be conundrum, said Xiao.

The draft law clearly spells out diversified ownership for the energy industry. But it also points out that parts of the industry important to both national security and China's economy should be dominated by state-controlled players, and those parts include nuclear power generators, oil and natural gas pipelines, electric and urban heating companies.

The draft also addresses energy-pricing system, saying that it should reflect supply and demand, resource scarcity and environmental costs; while combining market and state regulation, the pricing system should be dominated by market regulation.

Energy sector insiders have been calling for a market-based energy-pricing system, which has been written into the draft law, said Lin Boqiang, a professor affiliated with the China Center for Energy Economics Research at Xiamen University. He said almost all energy products are competitive in the market, and the market could set their prices in the future. "It's a matter of time. Right now, there is no timetable for that," Lin said.

Property rights of natural resources are also spelled out in the current version of the draft. According to Xiao, it defines ownership and exploitation rights of such resources as hydropower and ocean energy. A clearer definition of property rights will help market players to exploit and transfer resources, Xiao said.

Oversight and responsibility

The revised version of the draft law incorporating public feedback has stipulations on supervision and oversight. It defines the legislative body's supervision over the government, higher-level government authority over lower levels of government, and the government's authority over enterprises. For example, the government should report to the NPC on its energy work, and the NPC can make inquiries to the government about its work.

Energy reserves are an important measure to guarantee energy security. Govern-ment or the private sector can maintain natural reserves of resources and stockpiles of energy products for emergencies. It specifies the establishment of a national energy reserve system and creates standards for building and managing those reserves.

"Insiders in the energy sector disagree about how the reserve should be kept," said Zhou Dadi, an expert on Energy Law. "Some support emergency stockpiling while others insist on keeping mineral reserves in their natural forms. The draft Energy Law for public comments has included both forms of reserves."

Yan Luguang, an academician at the Chinese Academy of Sciences, said China's public energy reserve is too small currently, so building a reserve system is a pressing issue for the government.