CLP's warning on substantial tariff increases has sparked criticism from several quarters.
Many people want to see Hong Kong's electricity market opened up. They argue that tariffs could fall if competition was brought in from Guangdong.
However, such a move would not be feasible if the city's fuel mix for power generation was fixed at 50 per cent nuclear, 40 per cent natural gas and 10 per cent coal and renewables.
Guangdong's power market follows the regulated single-buyer model, in which the grid operator buys electricity from coal-fired, gas-fired, and nuclear power generators and then sells it collectively to customers. The customer is not free to choose particular generators and receives a unit of power generated from a bundle of different fuels. As Guangdong's fuel mix is dominated by coal (well above 10 per cent), it cannot meet Hong Kong's required fuel mix.
As long as our fuel mix is fixed, we can only import power when the proportion of coal drops below 10 per cent. This reduction in the use of coal will take many years to achieve. I am not against competition and meeting environmental objectives. I strongly believe deregulation is a long-term and gradual process that requires careful planning with a clear goal and road map.
Policymakers can prioritise benefits and take a holistic view of the electricity markets here and on the mainland when considering deregulation.
It is inefficient and unjust to introduce competition from a regulated market to deregulate another one. Enormous efforts can be taken to research the market dynamics between competitive and environmental objectives. Fuel mix is rarely fixed in open electricity markets. More thought should be given to market-driven mechanisms like cap-and-trade.
Kelvin Li, London, England