The significance of Demand Side Management (DSM) application in Shanghai compared to the present situation of electricity supply shortage and enlarged peak load demand, was described, Given the future power demand and DSM resource potentials of electricity and power saving, the cost-effectiveness of DSM application was assessed by using critical indicators, ie averaged unit cost of electricity saving and unit cost of avoided peak load capacity, The assessment showed that, DSM will contribute to the noticeable saving in electricity and avoiding in peak load capacity and will mitigate the pressure of the new power supply capacity demand on the Utility in Shanghai in a lower cost than the cost for new capacity installation.