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Wednesday, April 26, 2017, 00:39

Power scheme to cut electricity charges by 5%

By Willa Wu

Power scheme to cut electricity charges by 5%
Hong Kong's first electric coach is unveiled by CLP Power Hong Kong Ltd, in Hong Kong on May 9, 2013 as part of a green initiative to promote wider use of environmentally-friendly transport. (AFP PHOTO / Philippe Lopez)

HONG KONG - Households and businesses in Hong Kong will enjoy an electricity tariff cut of at least 5 percent by late next year after the government on Tuesday announced that the two major power companies would reduce their profit caps under the new electricity costing agreement.

CLP Power, which supplies power to Kowloon and the New Territories, and Hong Kong Island provider Hongkong Electric (HKE) will cut the permitted rates of return on the companies’ fixed asset investment from the current 9.99 percent to 8 percent under the new Scheme of Control Agreements each signed with the government.

Lowering the profit caps will bring a more than 5 percent drop in electricity bills if relevant conditions, such as the company’s balance of the average net fixed assets and operating costs and the price of fuel remain unchanged, Secretary for the Environment Wong Kam-sing said.

The new agreements, set for 15 years, are five years longer than the current ones. They will take effect on Oct 1 next year for CLP and Jan 1, 2019 for HKE. Both expire in 2033.

The formula for power tariffs remains the same, with two major components – the basic tariff comprising a standard cost of fuel and other costs required for electricity supply and a fuel cost adjustment, subject to fluctuating fuel prices on the open market.

But under the new agreements, the fuel cost adjustment will be reviewed more frequently than the present once a year so the balancing Fuel Clause Recovery Account can be maintained at a lower level.

Wong said the changes are “reasonable and appropriate” as they achieved balance between responding to the public’s appeals for a reduced rate of return and encouraging power companies to meet the city’s electricity demand while helping to improve the environment.

Wong said the new agreements will help to reduce the carbon intensity by between 65 percent and 70 percent by 2030 as set out in the Hong Kong’s Climate Action Plan 2030+ announced in January.

But despite the optimism both companies said they would come under great pressure to cut tariffs considering the investment required to bring cleaner energy to the city.

Another highlight of the new agreements is the incentive schemes established to enhance power companies’ performance in supply reliability, operational efficiency, customer service, promotion of energy efficiency and conservation, as well as the development of renewable energy.

The incentive schemes include injecting more funds into existing energy efficiency funds to cover more buildings in an attempt to enhance energy efficiency. Meanwhile, incentives would reward companies that managed to achieve energy savings of 4 percent to 5 percent.

Wong did not reveal details about the incentives.

Under the new agreements, a Feed-in Tariff scheme will be introduced to encourage the private sector and the community to consider investing in distributed recycling energy.

Wong noted that the power generated by distributed recycling energy facilities could be sold at a higher rate than the normal electricity tariff applied by the power companies.

The Democratic Alliance for the Betterment and Progress of Hong Kong (DAB), the city’s largest political party, expressed reservations on the new agreements. The tariff rate might go down in the short term but the public might not benefit since charges were likely to rise in the long run.

The DAB suggested authorities should bring competition into the power market to create more room for tariff cuts.

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