CLP puts Leung on the spot over energy
Just months after the painful wrangling with the government over the new electricity tariffs, CLP appears to be in a warring mood again. The power company warns that energy bills will be 'materially' higher by 2015 due to a 40 per cent increase in fuel costs. Chairman Michael Kadoorie also fired a rare broadside against government's inefficiency in projects like the arts hub and Kai Tak redevelopment, saying there might be complete darkness in the city if CLP's management and operation met those standards. Not surprisingly, people felt provoked and even threatened by the remarks. Different theories have been offered as to why CLP chose to make itself an enemy of the public when the next tariff adjustment is not due until the end of the year. Some say it was still aggrieved by the political pressure to cut back this year's increase from the proposed 9.2 per cent to 4.9 per cent. Others believed the power giant was acting tough in a political gesture to incoming chief executive Leung Chun-ying, and possibly a new environment minister in charge of the energy portfolio.
Objectively speaking, CLP is just being frank about the difficult years ahead. It is true that clean energy comes at a price. Under the user-pays principle, customers should be prepared to pay more for a better environment. But it is not going to help if the public felt they were intimidated to pay more. A provocative approach is hardly the right way forward.
Arguably, a listed company like CLP is duty bound to defend shareholders' interest and try to maximise profits. Under the so-called scheme of control, which runs until 2018, the two power companies have been guaranteed a near 10 per cent rate of return annually on their investments until 2018. It seems too sweet a deal in a society where calls for government monitoring and intervention in public utilities have become increasingly vocal. The scheme may have served Hong Kong well in the past when there was a need to increase energy supply to meet a booming economy, but a guaranteed-profit agreement should be history now. A better mechanism is needed to ensure public utilities are commercially viable while socially responsible at the same time.
The public outcry shows any tariff adjustment should be handled with great sensitivity, especially when the two power suppliers are protected by a profit scheme that puts consumers in a vulnerable situation. How to tackle the problem will be a major test for the new chief executive. So far Leung has been vague about his policy on the energy market. He should not shy away from adopting a tougher stance if needed. Until the scheme of control can be abolished, there should be better ways to handle the annual adjustment.
The controversy has renewed momentum for a thorough debate in the community on the way forward. This includes whether the market should be opened up to new players to enhance competition.