Prediction of utilities' natural gas needs may have been too high

Environment officials tried yesterday to ease fears of drastic electricity price increases in the next few years, saying the city might not need to double the amount of natural gas used by 2015 as was previously predicted.

Vivian Lau Lee-kwan, deputy permanent secretary for the environment, said better-than-expected effectiveness of sulphur scrubbers installed at the power companies' coal-fired generation units meant they might not need to burn more gas to meet emission caps in three years.

Lau was speaking at a meeting of the legislature's Economic Development Panel to discuss this year's power prices.

Her comment was made in response to lawmakers' fears that the charges of CLP Power would surge drastically as more and higher-priced gas was used.

The Environment Bureau earlier projected that gas use would need to double by 2015 so that the power firms could meet the emission targets for that year. But the latest review showed that this could be postponed, though it was not immediately known to which year. Currently, natural gas accounts for about 20 per cent of CLP's fuel mix. The rest is 50 per cent coal and 30 per cent nuclear.

"The two power firms might need to go back to review their data. But it seems now that we don't need to double," Lau said.

The challenge would be greater for CLP, which is switching to new gas piped from Central Asia via the mainland this year as its much cheaper supplies from Hainan Island run out.

It is estimated that power charges could rise by 20 cents per kilowatt hour above the 2012 level if all the gas provided for in a just-approved contract is used.

In the 20-year contract between CLP and PetroChina, Hong Kong can import up to 6 billion cubic metres of gas a year. The per-unit price of gas is between US$18 and US$20.

CLP Power managing director Richard Lancaster said it was still difficult to gauge how long the cheaper gas from Hainan would last. "It could be some years before it is exhausted," he said.

The price of gas from the shrinking Hainan reserve is just a third of that from Central Asia. The firm said the reserve would still supply about 30 per cent of the gas it needed this year.

Lancaster said future power prices would be subjected to various factors including electricity sales and levels of investments.

CLP Power and Hongkong Electric increased charges by 5.9 per cent and 2.9 per cent respectively this year. Most of the rise was attributed to increasing fuel costs.