CLP Group

Don’t bet on cheaper power bills: Hong Kong officials can’t promise 5 per cent cut

Lawmaker questions why the government did not try to end the duopoly in electricity market

PUBLISHED : Saturday, 29 April, 2017, 1:14pm
UPDATED : Saturday, 29 April, 2017, 11:20pm

Lower electricity bills cannot be guaranteed even though the Hong Kong government has moved to restrict the profits of the city’s two power companies, according to the acting environmental minister.

Undersecretary for environment Christine Loh Kung-wai told the Legislative Council on Saturday that such promises could not be made. It came after the government on Tuesday unveiled a new 15-year regulatory agreement with CLP Power and HK Electric, known as the scheme of control, which lowers what the firms can earn on their fixed assets from 9.99 to 8 per cent.

Following the announcement, the Environment Bureau suggested that power bills would be cut by at least 5 per cent next October if “all other factors remain unchanged”.

Guaranteed earnings cut for Hong Kong power firms

“I am being honest with you all. Can [the government] guarantee a tariffs reduction? [We ] cannot make such promises based on the whole the discussion [of the agreement],” Loh said during Saturday’s joint panel on economic development and environmental affairs.

Still, Loh insisted that the prediction of a 5 per cent reduction was a “practical answer”.

Permanent secretary for the environment Donald Tong Chi-keung, however, predicted that electric bills could rise in the long run.

“[The two firms in the future] have to increase the ratio of natural gas for electricity generation and to replace the existing coal-fired generating units,” Tong said. “A rise in power bills is expected to occur.”

Gary Chan Hak-kan, from the Democratic Alliance for the Betterment and Progress of Hong Kong, also forecast higher bills in the future.

“You are too naive and innocent if you think the new deal can cut the electricity bills... The two companies could face cost increases, which makes a tariff reduction not possible,” he said.

Leung Yiu-chung, from the pro-labour Neighbourhood and Worker’s Service Centre, questioned why the new agreement had failed to break the duopoly in the city’s electricity market.

“The two companies have been monopolising the market for decades. The new deal means they can occupy the market for another 15 years,” Leung said.

Loh said the government would study the possibility of expanding the market in the future.

Bid to cut Hong Kong electricity duopoly’s returns sparks Legco debate

Managing director of HK Electric, Wan Chi-tin, said he understood the public’s concern over power bills, but he could not promise a reduction because there were too many other uncertain factors.

“The guaranteed return is just one of the factors that affect electric bills. Others included fuel costs, net assets value, operational costs, interest,” he said during the same panel.

“Just like 20 months ago, we couldn’t predict that we could cut power bills by 17.2 per cent this year. So it is difficult for us to foresee the bill levels in 2019.”

Managing director of CLP Power, Paul Poon Wai-yin, said company profits would fall by HK$2.1 billion under the new agreement.