Think tank floats ‘fairer’ water supply deal as Hong Kong’s bill rises

City sees 6 per cent price hike on fresh water under three-year contract with mainland firm

PUBLISHED : Saturday, 05 November, 2016, 8:02am
UPDATED : Saturday, 05 November, 2016, 8:02am

A think tank has proposed a fairer pricing deal for the city’s water supply from mainland China amid escalating costs.

Since 2006, the Hong Kong government has been paying a fixed lump sum to its mainland supplier for an annual quota of 1.1 billion cubic metres of water from Dongjiang, or East River, in southern Guangdong province.

However, Hong Kong’s actual water consumption has only accounted for an average of 85 per cent of the agreed supply over the past 10 years, according to think tank Hong Kong Vision Project.

“This means we have been paying 15 per cent more than we should on water,” the think tank’s honorary senior research director Law Cheung-kwok said.

Law estimated the government had spent an extra HK$4.5 billion over the past decade, citing official records from the Legislative Council.

The think tank’s researchers suggested the city should instead pay based on actual consumption.

For example, if one year’s water consumption falls below 95 per cent, the government should pay 95 per cent of the price. The remaining 5 per cent should be shared between the two parties.

Another recommendation was to adopt a more transparent formula in calculating the price of water, since current adjustments were made exclusively at the discretion of the state-owned supply company Guangdong Investment, Law said.

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The government’s water bill increased 6 per cent to HK$4.5 billion this year, compared to last year, when the government signed a new three-year contract with Guangdong Investment. The bill is again set to rise by more than 6 per cent next year to HK$4.8 billion, according to the contract.

The mainland company cited an increase in operating costs, unstable demand for water supply and volatility in the Yuan as reasons for the price hike.

However, the think tank said it would be fair on both parties if a stipulated fare adjustment formula was installed, similar to that used by the MTR Corporation, which takes into account factors such as changes in wage expenditure and material costs.

The think tank estimated the government could cut HK$200 million off its bill, based on last year’s figures.

David Chen Yongqin, a professor at the Chinese University of Hong Kong’s department of geography and resource management, who was not part of the research, agreed that a flexible pricing and supply arrangement would benefit Hong Kong.

He said the government should also strengthen development of two new water sources, including desalination and recycling.

Hong Kong imports 70 to 80 per cent of its fresh water from Dongjiang, one of the main tributaries of the Pearl River. The remaining is supplied by rainwater collected from Hong Kong’s 17 local reservoirs.

The government is set to renegotiate a new three-year contract at the end of 2017.