CLP Group

CLP Power seeks 2.8pc tariff rise for fuel, network costs

PUBLISHED : Wednesday, 23 November, 2011, 12:00am
UPDATED : Wednesday, 23 November, 2011, 12:00am

The biggest power supplier has proposed increasing the electricity tariff by more than 2.8 per cent for next year, citing the rising fuel price and inflation in material costs for its generation and transmission network.

CLP Power, which has 2.3 million users in Kowloon, the New Territories and Lantau, is also reviewing its tariff structure for non-residential users, who have been paying less, per kilowatt hour, the more they use.

It is discussing tariffs with the Environment Bureau, and is expected to report the final outcome in the middle of next month.

A CLP spokeswoman said obligations to cut pollution and make supply more reliable would require extra investment in infrastructure. Inflation, too, had put strong pressure on the tariff level, she said.

A person familiar with the situation said international prices for fuel, such as coal, increased by 30 per cent last year, while material costs recorded double-digit growth. Another challenge is that the firm will have to increase the proportion of gas-fired generation next year, requiring retrofitting to supply and use the gas.

The person said CLP was understood to be seeking an increase of over 2.8 per cent, the same raise it was granted last year since the basic tariff - which reflects the overhead costs of power generation and transmission - had to be adjusted, too. Last year, the tariff increase was mainly driven by higher fuel prices.

It would be the second time in 10 years that CLP has adjusted the basic tariff. The last change was in 2009.

Apart from tariff increases, CLP is also considering changes to its pricing structures to address criticism that its existing system does not promote energy conservation, since heavy users get discounts. It is not clear how the structure will eventually be revamped and how commercial users will be affected.

But the catering trade is worried about the change.

'It is going to have a direct impact on our operation costs, and I hope the change will not be too significant,' said Simon Wong Ka-wo, president of the Hong Kong Federation of Restaurants and Related Trades. Electricity accounts for about 5 per cent to 7 per cent of the operating costs of an average restaurant - much less than rent and wages.

CLP Power's regressive tariff structure for commercial users has been criticised by green activists as discouraging people to save electricity. About 1.4 per cent of these heavy users were consuming about a half the power generated by CLP, according to estimates based on 2004 data.

A study has found that ending such discounts would save up to 1.2 billion kilowatt hours a year and earn an extra HK$1.4 billion in revenue for CLP.

Hongkong Electric, which serves Hong Kong Island and Lamma, said it was still reviewing the tariff rate with the government, with references to electricity sales and fuel prices.


The commercial sector accounted for this proportion of CLP's local sales in the nine months to September