CLP Group

Exco plea to power firms to cut rises

PUBLISHED : Wednesday, 14 December, 2011, 12:00am
UPDATED : Wednesday, 14 December, 2011, 12:00am

Top government officials have made an unprecedented appeal to the city's two power firms to cut price increases next year.

They say the planned rises are 'excessive' and fear they could accelerate inflation.

Hongkong Electric said it had responded to the government's appeal by announcing a 6.3 per cent increase. It would not say by how much it had cut the planned rise.

But CLP Power says capital expenditure and a three-fold increase in its fuel costs means it will charge customers an average 9.2 per cent more. This will push up the monthly bill for most households by about HK$25. CLP said it had little room to manoeuvre. Managing director Richard Lancaster said: 'A 9.2 per cent increase is the best we can do, and we have tried our best to minimise the impact.'

The increases will enable the two firms to earn the maximum allowable return of 9.99 per cent on their net fixed asset values - specified in their scheme of control agreed with the government - which could be the highest in a decade.

Secretary for the Environment Edward Yau Tang-wah reported the issue to the Executive Council yesterday morning. 'The council has expressed reservations about the excessive tariff hikes,' he said, adding that it had asked both firms to reconsider their positions.

Speaking at a meeting of the Legislative Council's economic development panel yesterday, Yau said the increases did not take into account the public's ability to pay or the impact on society.

He said CLP could consider following Hongkong Electric's example of delaying the recovery of its fuel costs from consumers. But CLP said its costs, which will rise from HK$4 billion to HK$12 billion next year, were too big for it to shoulder alone.

Lancaster said CLP would introduce a two cents per kilowatt hour basic tariff reduction, excluding fuel costs, for low-consumption residential households for the first 400 units used. Those using more than 2,600 kilowatt hours would pay more.

At the same time, the company will abolish discounts for non-residential users who reach a certain level of consumption and introduce a flat rate to promote energy conservation. CLP said most small businesses would pay less than HK$131 more on their monthly bill.

CLP's increase will add HK$50 to the two-monthly bill of households using 500 units of electricity a month, which accounts for about 70 per cent of its domestic customers.

Yau questioned whether CLP had done enough to control its rising operating costs and wondered why the firm had taken into account some unnecessary or untimely capital spending.

Billy Mak Shui-choi, from the Department of Finance at Baptist University, said the direct impact on inflation would be minimal because power costs were a small part of household expenditure.

'There might be a knock-on effect on heavy power users like the trams, the MTR or restaurants which will pass on the extra costs to consumers. But it is difficult to quantify the impact now,' he said.

Political parties slammed the increases. 'These firms are wolves which completely ignore if the people can bear the increase and how the tariff hike will trigger inflation,' said unionist legislator Lee Cheuk-yan.


CLP Power's rise will add HK$50 to the two-monthly bill of those using 500 units of electricity a month - this percentage of domestic customers