CLP Group

CLP agrees to provide more details on tariff rise

PUBLISHED : Saturday, 24 December, 2011, 12:00am
UPDATED : Saturday, 24 December, 2011, 12:00am

CLP Power will 'respond positively' early next week to questions from the environment minister as to how operating costs and premature capital expenditures might affect its proposed increases in electricity charges, a senior CLP executive says.

The pledge was made by Richard Lancaster, managing director of CLP Power, at the economic development panel yesterday, although he would not make clear if there would be good news to consumers.

Earlier, the power utility bowed to public pressure and revised its tariff increase from 9.2 per cent to 7.4 per cent. The tariff has two components: a basic consumption charge of about 85 cents per kWh, and a fuel clause.

'We will continue discussions with the government. We hope we can respond positively early next week,' said Lancaster, hoping there would be no delay in introducing the new tariff from January 1.

However, Lancaster rejected claims by Secretary for the Environment Edward Yau Tang-wah that the company planned 'premature' capital expenditure on 'follow up studies and preparatory work' next year to increase generating capacity by the end of this decade.

The government is concerned about the company's spending because it and Hongkong Electric, as the city's other licensed power supplier, are bound by agreements called schemes of control that link their returns to net fixed assets and environmental performance.

'We do not make any capital expenditures that is not approved by the government,' he said, adding that company needed to plan ahead to ensure reliable power supplies.

Lancaster said the expenses related to studying various options for new generating facilities, including converting existing coal-fired plants to gas-fired ones. The company was also examining its demand-side management. CLP has already spent about HK$78 million this year for an initial study for these purposes.

But Yau pointed out that the follow-up study and works, costing hundreds of million dollars, was not among capital expenditure agreed to by the government, as there was no justification at this time for CLP's power demand growth forecasts. He demanded the company drop this item from next year's budget.

Regarding its operating costs, CLP clarified that expenses for emissions control would only add 4 to 5 cents to the 85-cent basic tariff. But Yau replied that this had already been factored into the tariff level since 2011.

Lancaster said operating costs next year would rise 11.2 per cent to HK$3.9 billion due to expenses incurred in the disposal of some assets at CLP's Black Point power station.

The lawmakers later passed a non-binding resolution asking both suppliers to delay tariff increases until March, but another resolution to obtain the detailed five-year development plans of both companies from the government was rejected. Legislator Fred Li Wah-ming said he would raise the request again at a future house committee meeting.

During the meeting, lawmaker Leung Kwok-hung strode over to Lancaster's seat and offered him some 'paper hell money' (used as offerings in Chinese funerals), saying the company should be ashamed of itself for raising tariffs while it was enjoying good profits.