HK Electric, CLP Power face cut in earnings and prospect of competition in longer term

The government wants to slash the permitted return of the city's electricity suppliers to as low as 6 per cent and tighten the process of approving tariffs as it aims to reform the regulatory regime.

Rolling out a public consultation on the development of the electricity market yesterday, environment chief Wong Kam-sing said CLP Power and HK Electric faced a cut in annual returns from the existing 9.99 per cent on their net fixed assets under the 10-year scheme of control agreement, which expires in 2018.

And the controversial idea of importing power from the mainland has been shelved for now.

However, the utilities - both natural monopolies in their own service areas - will be spared competition, at least in the near future. The government will hold discussions with the two firms and conduct joint studies on grid access arrangements after 2018.

"It is unlikely that we would have any new suppliers of sizeable scale either from the mainland or locally in the near term," said Wong.

"To pave the way for Hong Kong to introduce competition in the longer term, we plan to conduct the necessary preparatory work … such that new suppliers, when available, may participate in the electricity supply market."