No easy escape from the powers that be

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

Everyone is so upset at the greed of the power companies that even chief executive candidate Henry Tang Ying-yen has jumped on the bandwagon.

The former chief secretary yesterday denounced the power supply market as uncompetitive and called for it to be opened up. That's all very well, but how? We have created a duopoly monster that would be difficult, if not impossible, to slay without incurring serious costs to ourselves.

After a public outcry over the new tariff rises, Hongkong Electric and CLP Power made token concessions. Subsidised electricity, it seems, is an entitlement in Hong Kong. In reality, it would be better if the companies had raised them to earn the full profit of 9.99 per cent of net fixed assets, as capped by the so-called scheme of control.

That way, the bills would become so expensive that people would be forced to cut back. That in turn would help enhance energy efficiency and cause less pollution. Alas, everyone is fixated on affordable tariffs so that we can waste as much as ever.

We get the electricity market we deserve. Decades ago, we made a Faustian bargain in the form of the present scheme to get steady and reliable supply, continuous investment and facility upgrades. The result was that the companies were guaranteed double-digit profits tied to their investment in fixed assets.

In the most recent negotiations over the scheme in 2008, officials managed to cut the profit cap to single digits - well, sort of - 9.99 per cent. Because of the scheme, the companies have become so vertically integrated - owning everything from generation and distribution to supply and services - it would be tough to break them up.

Even if we managed to, we would have to compensate them again for their investments, which we have paid for already. Tang may well be right. But let's see the devilish details before we get too excited by his headline-grabbing sound bites.


Send to a friend

To forward this article using your default email client (e.g. Outlook), click here.

Enter multiple addresses separated by commas(,)