Economist urges government to open up the energy market

PUBLISHED : Tuesday, 26 August, 2003, 12:00am
UPDATED : Tuesday, 26 August, 2003, 12:00am

Reform could lead to more choice and lower prices, forum is told

An economist yesterday urged the government to start liberating the energy market this year to allow households to choose their electricity suppliers.

The 15-year contract regulating Hong Kong's two privately owned electricity companies, China Light and Power (CLP) and Hongkong Electric, expires in 2008 and is due to be reviewed this year.

Lam Pun-lee, an associate professor at Polytechnic University and a member of an energy advisory group, told an international conference on energy reform at Baptist University yesterday that the government should tell the two power companies this year whether the energy market was to be opened.

'Electric companies make long-term investment plans. No matter what, the government should set up targets for its energy plans after 2008 as soon as possible,' he said.

Professor Lam said it would take four years to prepare for the liberalisation of the energy sector. 'We recommend a gradual and cautious approach to market reform,' he said.

He said preparation work should include enhancing links between the two electricity companies and the mainland's power grids, establishing fees for access to power grids and legislation covering electricity reforms.

Professor Lam said that if the energy market was opened in 2008, the government would be able to grant franchises or licences to electricity distributors and suppliers, which would be able to import power from south China.

'After a number of years, small users could aggregate their demand and choose suppliers,' he said.

But Larry Chow Chuen-ho, director of Baptist University's energy study centre, estimated that connecting to mainland power grids would only bring down electricity bills by 10 per cent at the most.

'Electricity comes cheap when there is an oversupply. However, there's not much surplus left in Guangdong's power production,' he said.

Professor Chow said cheaper electricity was available in Guangxi and Yunnan, but the costs would increase eventually.

He said an authority overseeing the maintenance of the power grid would be necessary if the government opened up the electricity market. 'Electricity suppliers will concentrate on power generation rather than the maintenance of the network as the power grid is shared by all suppliers,' he said.