With social economic reform in the past decades, the power industry of China is gradually evolving from a highly integrated one toward an electricity market, which can be characterized based on the transition of the power dispatch principle. To attract investment in the power generating industry. China introduced non-state-owned power plants to the original system of a highly vertically integrated power industry with annual power generation quota guarantees, which makes the traditional economic dispatch principle not applicable. The newly debuted energy saving power dispatch (ESPD) is an attempt to fully exploit the maximum energy savings and was implemented by an administrative code. Starting in August 2007, the pilot operation of the ESPD was implemented in five provinces, but after two years, it is still not widely applied all over the country. This paper details the transition of China's power dispatch principle with particular attention to its origin and content. Moreover, the factors that influence the ESPD's actual energy saving effect are discussed, as well as the sustainability of the policy. (C) 2010 Elsevier Ltd. All rights reserved.