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Denise Tsang

Increase will widen gap in charges paid by consumers on both sides of harbour

Hongkong  Electric is set today to announce an increase of 2 to 3 per cent in tariffs next year.

The move will further widen the gap in charges paid by  consumers on Hong Kong Island and Lamma and those in Kowloon and the New Territories.

News of the impending announcement has prompted lawmakers from two political parties to urge the company, which monopolises the power supply to Hong Kong Island, to call for a freeze in power charges.

Representatives from the company will join those from CLP Holdings at the Legislative Council's economic services panel meeting today  to brief lawmakers on their annual tariff review.

Fred Li Wah-ming,  of the Democratic Party, said yesterday he understood Hongkong Electric would raise its tariff by about 2 to 3 per cent, while CLP would maintain its present rate.

The Hongkong Electric increase is slightly below market speculation. A 2.5 per cent rise would mean  the unit tariff  would increase from HK$1.17 to about HK$1.20 from  January. CLP charges 87.2 cents per unit.

'The gap between Hongkong Electric and CLP in the average unit tariff would widen further if Hongkong Electric increases its charges,' Mr Li said, adding that Hongkong Electric had raised its tariff four times in recent years.

He said the company should absorb the higher cost of using liquefied natural gas and not transfer the increase to consumers.

The Democratic Alliance for the Betterment and Progress of Hong Kong shared the Democrats' stance. Party lawmaker Chan Kam-lam  said the gap between Hongkong Electric and CLP was more than 30 per cent in their average unit charge. 'There is no reason for Hong Kong households to have a more expensive tariff than those in Kowloon and the New Territories.'

Mr Chan urged the government 'to do something' when reviewing the two power companies' scheme of profit control. He said under the present scheme, action the administration and legislators could take to regulate tariffs was very limited.

Earlier, Secretary for Economic Development and Labour Stephen Ip Shu-kwun,  said the government hoped there would not be a large difference in tariffs even if the companies decided to increase charges.

Hongkong Electric's tariff rise might be unwelcome news for consumers but not from a shareholders' perspective, analysts said.

They said the Li Ka-shing controlled utility failed to earn the maximum permitted return between 2003 and 2005 and weak electricity sales so far this year  meant history would repeat itself this year despite an average 7.2 per cent tariff increase in 2006.

They estimated the company  would have forgone a total of about HK$3 billion in profits in the three financial years ended December 2006 as  tariffs had been raised by less than the entitlement  for this year.

'Hongkong Electric has a better chance to restore its return to 15 per cent next year after raising tariffs,' said an analyst with a European brokerage. 'It is not fair if shareholders still have to share the public's burden in a much stronger economy.'



HK Electric poised for tariff rise of 2-3 per cent