Hongkong Electric

Pull plug on power duopoly, Tang says

PUBLISHED : Friday, 23 December, 2011, 12:00am
UPDATED : Friday, 23 December, 2011, 12:00am

Chief executive candidate Henry Tang Ying-yen added his voice yesterday to the public clamour against electricity price rises, calling for the power duopoly to be opened to competition.

'In the long run, Hong Kong should introduce competition [into the market],' Tang said during a radio interview.

'We could consider breaking the power supply into two different markets, for generation and distribution. On this, we have the example of the opening up of the telecom market.'

Asked again about the electricity tariff rises at a public forum organised by the Liberal Party, Tang said: 'It is the responsibility of the next administration to come up with a better agreement [with power companies] so that the tariff can be more reasonable.'

The government opened up the telecommunications market in 1995 and paid Hong Kong Telecom HK$6.7 billion to terminate its exclusive licence in 1998, eight years earlier than scheduled. That change allowed more operators to enter the market through the third-party access rights to the telecom giant's exchanges, causing the cost of international calls to plummet.

But whether breaking up the power monopoly, controlled by Hongkong Electric and CLP Power, would go as smoothly seems unlikely, as studies have concluded.

The two utilities control the supply, distribution and services, leaving no niches for newcomers to the business. If they are paid compensation, the Hong Kong taxpayer would have to pick up the tab. Questions have been raised about how to regulate a power supplier operating from the mainland and whether, and how much, the power grid owner should be paid in compensation.

There was a failed attempt in 2008 when China Power International vowed to break the duopoly and to supply power to border areas; it dropped its plan because the government did not want to duplicate the supply network.

Officials will have to confront the issue as they have pledged to notify the power firms by the end of 2015 if they decide the market is ready for opening up after 2018, when the existing regulatory regime expires.

Then both sides must discuss the financial arrangements relating to assets and investment left redundant by opening up the market. Issues related to the future regulatory framework must also be decided.

Tang's rival Leung Chung-ying said further study was needed.

'The most important [thing] is that the operator will have a reasonable return, and offer quality services at prices affordable to the public and businesses,' he said yesterday after the same forum.

A spokesman for the Environment Bureau yesterday said it was studying issues involved in reforming the market. The government has reportedly already appointed a consultant to study a range of issues, including how to introduce competition in the local market.

Dr William Yu Yuen-ping, the head of WWF Hong Kong's climate programme, said the city could start tackling the issue by strengthening the interconnections between the two firms to minimise their reserve generating capacity, which was excessive.

Dr Billy Mak Shui-choi, of Baptist University's department of finance, said any opening up should be cost-effective and not sacrifice the reliability of supply. He urged officials to learn the lessons of the power markets on the mainland and California, where either excessive regulation or fully liberalised markets have been cited as a cause of blackouts.


CLP Power's increase on electricity prices, after cutting the rise from 9.2 per cent on Wednesday. Hongkong Electric's rise will be 6.3 per cent