Opening up electricity market may not lower power prices

Opening up the electricity market to more competition might not help bring power prices down, and such a move should be weighed carefully, the environment minister told lawmakers yesterday.

After a row over tariff increases last year, some lawmakers hoped that breaking the duopoly of CLP Power and Hongkong Electric would help to bring about lower tariffs. But Secretary for the Environment Wong Kam-sing said that was not necessarily the case.

"Overseas experience tells us it might not have a positive impact on tariff reduction," Wong told a meeting of the Legislative Council's economic development panel. "Competition might bring both good and bad, and we need to tell the public all about it," he said without elaboration.

Wong said there was not much room to change the regulatory regime of the two power firms in an interim review of the arrangements next year. He said contract terms limited what could be done before the scheme expired in 2018, but promised to give the public all the facts and views on opening up the market before a decision was made.

The government is obliged to inform the two companies no later than 2016 if it intends to open up the market from 2018. But the regime also allows the status quo to remain until 2023.

Wong said a better connection between the two power grids might be needed before a third producer could be admitted. Even then, he said, there remained the question of whether old users could switch to a new grid at the beginning.

He said details of the tariff adjustments for next year would be made public next month, but that a tariff structure revamp that would make big users pay more might need more time to be considered due to its complexity.

Some lawmakers, like Leung Kwok-hung, wanted poor people spared from tariff increases, while Jeffrey Lam Kin-fung warned the remaining factories in Hong Kong might move out if big users were penalised.

Undersecretary for environment Christine Loh Kung-wai pledged to offer a comprehensive guide to the issues surrounding the mix of fuels used to generate power, the use of nuclear energy, and the health costs of air pollution from burning fossil fuels.

She urged the public to gain a better understanding of nuclear power as a quarter of the city's energy already came from a nuclear power station in Guangdong. "You just can't avoid understanding it because of fears," she said.