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Denise Tsang

Tuen Mun power plant to be fitted with pollution control equipment

Hong Kong's biggest polluter has promised to play its part in clearing our smog-filled skies, but warns that it comes at a cost.

CLP Holdings, the larger of the city's two electricity suppliers, planned to retrofit the four coal-fired generation units at Castle Peak power plant in Tuen Mun with flue gas desulphurisation equipment as well as burning more natural gas and low sulphur coal as key measures to lower emissions, group managing director Andrew Brandler said.

However, the trade-off on the environmental initiatives would be consumers bearing the costs, he added.

CLP's efforts only meet partial expectations of Chief Executive Donald Tsang Yam-kuen, who put  extra  pressure on the power utilities' environmental performance in  his maiden policy address.

The company's 'user-pay' principle deviates from Mr Tsang's policy of having the utilities' shareholders sharing the costs.

'We are a service provider and a regulated business,' Mr Brandler said.

'The concept that shareholders of power companies should pay for it and consumers should get a free ride is completely inconsistent with the nature of the regulatory arrangement we have.'

Determined to raise the city's quality of living, Mr Tsang told CLP and  Hongkong Electric Holdings to step up green measures and avoid passing the costs on to end-users 'as far as possible' to meet emission limits   set by   Hong Kong and Guangdong   by 2010.

The two companies accounted for 92 per cent of sulphur dioxide, 58 per cent of nitrogen oxides and 46 per cent of particles emitted in Hong Kong,  government figures show. CLP is the biggest emitter of sulphur dioxide.

Arguing that hazy skies are a regional problem given the robust economic growth and industrialisation in the Pearl River Delta, Mr Brandler said CLP's emissions of sulphur dioxide and nitrogen oxides contributed to only 4  per cent  and particles less than  1 per cent of the region's total.

He said  meeting the emissions limits  would be difficult as they were  based on low levels in 1997 and required closer co-operation from across the border.

Riding on Mr Tsang's pledge, CLP is pressing the government to  approve  its liquefied natural gas (LNG) terminal project so that it can burn more clean fuel and meet the 2010 emissions targets.

Analysts saw the move as a strategy to obtain funding for the project, which is excluded from  the approved spending of up to  $24 billion between this year and 2008.

'Natural gas is a much cleaner fuel but it is more expensive,' Mr Brandler said.

He pointed out that burning a more expensive fuel would not necessarily increase  tariffs as a result. 'Assuming LNG terminal costs  of $5 billion  spread over three years it is not a big investment. It is a jetty with a couple of storage tanks.'

The main rationale behind the LNG project was that CLP's gas supplies from offshore fields near Hainan were drying up sooner than anticipated.

Mr Brandler said CLP, which also sells electricity to Guangdong on top of serving customers in the New Territories, Kowloon and Lantau, would not necessarily solve the pollution problem by  cutting down exports.

'Guangdong's economy will be three times bigger than it is [now] by 2010 and if we stop exporting electricity, where does the energy come from?' he said. 'Factories across the border will burn dirtier diesel for electricity. It is a zero-sum game.'

While battling to rid itself of   'Hong Kong's biggest polluter' label, CLP faces the prospect of having its return trimmed after the  scheme of control regime expires  in 2008.

Sources close to the government said a key feature of the post-2008 governance framework would be a modified version of the proven scheme with lower return rates on the power firms.

Earnings of CLP and Hongkong Electric's regulated electricity supply are based on their spending on assets giving them a guaranteed return of 13.5 per cent to 15 per cent.



CLP promises cleaner energy but warns users have to pay