Since Demsetz in 1968 proposed the competitive franchise bidding competition in place of regulation committee in the governance of utilities,the theory of franchise bidding and its application have a great development. However, Demsetz's excellent performance at auction can only be achieved in a favorable environment.The paper makes clear the appraisal standards and influence factors of performance, and analyzes the effect and the the related problems of franchise bidding reform in China's utilities. Franchise bidding reform has an affirmative role but must be improved in some aspects in China. It cannot replace the reform of management system and need other reforms of related system to be coordinated too.