CHINA will expand a graduated power tariff system for residential users, now being tried out in several selected provinces, nationwide in the first half of this year as the reform of prices for energy products deepens.

The new system, under which electricity prices are set at three tiers, aims to charge higher rates for heavy users in a shift from the current uniformed rates which vary among regions.

Peng Sen, vice chairman of the National Development and Reform Commission, said on Wednesday the plan has been approved by the State Council and will proceed in each provincial area in the first half.

Though analysts say the graduated tariff is a step forward in reforming the power industry, the impact and significance may be limited as residential users only make up about 10 percent of China's power use.

Although the graduated system has been proposed for years, it will only be implemented this year because of inflationary concerns. Premier Wen Jiabao has set a 4 percent target for inflation this year, leaving room for energy and utility prices to be raised.

Peng also said the NDRC has submitted a fuel pricing reform plan, which allows for more frequent adjustments in pump rates, to the State Council for approval. The current system allows a price change when a basket of crude rates moves more than 4 percent over 22 working days though the government also looks at other factors when adjusting prices.

"While it is possible for oil products pricing reform to be delayed, we believe it is likely to take place after the March national conferences," Goldman Sachs said in a note, referring to the sessions of China's political advisers and lawmakers which end next Wednesday.