CLP's tariffs have always been set on principles of fairness

I refer to the letter by Cheung Kit-yan of Greenpeace ('CLP's unequal electricity rates rob the poor to benefit the rich', February 25).

CLP's electricity tariffs have always been set on the principles of fairness and to reflect the different costs of serving different groups of customers.

They are designed to avoid cross subsidies between the major groups of customers such as small and large businesses, public services and residential households.

In 1996, with the support of the government and the wider community, CLP introduced a change to the tariff for its then 1.5 million residential customers which comprised 86 per cent of its customer base. That meant the largest group of users paid a progressively higher rate the more units they used within a billing period, so as to promote energy conservation.

This initiative has since been adopted in a number of countries.

Applying the same approach - of increasing unit rates the more energy is used - for large non-residential customers is much more problematic. Unlike residential customers, these customers pay a demand charge based on their maximum energy demand in addition to their energy charge.

This is to reflect the cost of the investment in infrastructure needed to meet their demand for electricity.

Since 1998, the biggest increase in electricity consumption has in fact come from new infrastructure and the public service sector, including railways, hospitals, schools, universities, public housing estates, water supplies, drainage services and the airport.

To charge these organisations a higher unit rate for every extra unit of electricity they use every time they educate more students, add more hospital beds, run more trains or employ more people would distort the social cost of providing these services.

We already encourage these organisations to use energy carefully, through providing free energy audits and practical and financial assistance to minimise their electricity consumption.

We will continue to regularly review the appropriateness of our tariff structures, to take account not only of fairness and equity in the costs to serve different groups of customers and international best practice, but also to listen to representative views from each of our customer groups, who would be affected by any change.

CLP's customers are well aware that CLP's basic tariffs are on average lower than they were in the mid-1990s and that they represent fair value for one of the world's most reliable electricity supplies.

L. M. Chow, director of marketing and customer services, CLP Power Hong Kong Limited