Huge refund to CLP Power, Hong Kong Electric sparks questions

HK$1.7b given to utilities brings calls to offset price increases, and demand for explanation

PUBLISHED : Saturday, 29 September, 2012, 12:00am
UPDATED : Saturday, 29 September, 2012, 4:30am

The government quietly refunded nearly HK$1.7 billion to the two power companies for overcharged rent and rates on properties even before disputes over the money were finally settled.

The disclosure brought calls yesterday for CLP Power and Hongkong Electric to use the money to offset any price increases in a tariff review expected next month. But while CLP has returned to customers about HK$503 million of its HK$1.52 billion interim payout, Hongkong Electric has yet to say what it will do with its expected HK$1 billion refund, of which it has so far received about HK$140 million.

Neither the companies nor the government have made any public announcement about the payments, except that CLP referred to its refund in a note to its 2012 interim report.

CLP Power has previously warned of a 40 per cent tariff rise in three years due to more expensive and wider use of natural gas. In May, its chief executive, Andrew Brandler, said the company would have to use twice as much gas to meet the government's 2015 emission- reduction target. "The era of cheap gas is over," he said.

A member of the Energy Advisory Committee, Dr William Yu Yuen-ping, said the refund would be welcomed by power users. "With hundreds of millions of dollars, the two power firms will have more room to reduce their tariff increase next year," he said.

The power companies have been in long-running disputes over the way rates and government rents are calculated on their properties. The Court of Final Appeal ruled in favour of Hongkong Electric in June last year, but the Lands Tribunal, which is handling the CLP case, has yet to make a final judgment.

Neither CLP nor the government would explain how such a huge payout was possible to the company before the decision, but CLP said the exact amount was subject to the outcome of an eventual appeal.

Hongkong Electric said it was still discussing with the government the "final quantum" of the refund and how it should be handled. "We have received some money from the government and continue in discussions with them on the remaining portion," a spokeswoman said, without disclosing the received amount or how it would be spent.

The Ratings and Valuation Department said the partial refund was about HK$140 million and discussions were continuing about overpaid rent and rates for other financial years. It expected the eventual amount to be more than HK$1 billion.

CLP has paid a three-HK-cents-per-kilowatt-hour rebate to its customers since January this year after a row with the government over a proposed tariff increase of more than 9 per cent. Amid public anger, this was cut to 4.9 per cent, with about 40 per cent attributed to the refund.

Hongkong Electric cut its proposed rise from 8 per cent to 6.3 per cent by delaying the recovery of fuel costs from customers, but it has never made clear whether the government refund will be passed on to consumers.

Richard Tsoi Yiu-cheong, convenor of the Coalition to Monitor Public Transport and Utilities, said the government owed the public an answer on why it paid CLP before the case was closed. "It is all about public money and officials have an obligation to explain it and make it public," he said.

The Environment Bureau did not comment on the refund.