CLP Power and Hongkong Electric in last-ditch talks over tariff increases

PUBLISHED : Friday, 06 December, 2013, 4:28am
UPDATED : Friday, 06 December, 2013, 4:28am

The Environment Bureau and the city's two electricity suppliers are locked in last-ditch talks on tariff increases for next year, with proposed rises roughly in line with inflation.

Sources familiar with the negotiations said that with both sides due to report their tariff proposal to lawmakers on Tuesday, final details of the agreement were still being fine-tuned.

CLP Power, which supplies the New Territories and Kowloon, claims a move to cleaner but more expensive natural gas has left it under pressure to increase prices. It is understood to have proposed a 6 per cent rise.

But the eventual deal could be closer to the 4.3 per cent inflation rate the government has forecast for this year. The firm increased tariffs by 5.9 per cent this year.

Hongkong Electric, which supplies power to Lamma and Hong Kong Island, is likely to set a lower tariff rise.

One complicating factor is that tariff increases take into account investment in fixed assets, as well as fuel costs.

"One of the problems in the negotiation is whether some capital expenditure in the new five-year development plan up to 2018 should be booked next year," the source said.

Another source said government officials were trying to rein in the scale of the investment plans to keep tariff rises down. The source said a multimillion-dollar proposal by the two firms to develop offshore wind farms next year was likely to be downsized for that reason.

Dr Tso Che-wah, an energy expert from City University, expects tariff rises to be moderate given falling international coal prices. He warned of bigger increases in 2015 as CLP Power looks to use more natural gas to meet stricter emissions limits.