Spend public money on clean energy projects, not subsidised power bills, Hong Kong opposition lawmakers say

Government proposal to spend HK$8.7 billion subsidising electricity bills questioned at meeting of Legislative Council economic development panel

PUBLISHED : Wednesday, 04 July, 2018, 11:37pm
UPDATED : Thursday, 05 July, 2018, 8:40am

Hong Kong lawmakers on Wednesday questioned the logic behind a government proposal to spend HK$8.7 billion (US$1.2 billion) subsidising residents’ electricity bills over the next five years rather than using public money to upgrade the city’s “smart energy” energy infrastructure.

Wu Chi-wai, chairman of the opposition Democratic Party, said the money could be used to pay for two major projects that the city’s two power suppliers are undertaking in the next few years, lessening the need for the firms to increase electricity tariffs in the first place.

His suggestion came at a meeting of the Legislative Council economic development panel to discuss five-year development plans submitted by the two power firms which were approved by the Executive Council on Tuesday.

The two power firms – CLP Power and HK Electric – told the government on Wednesday that to meet the city’s emissions targets and use cleaner but more expensive natural gas in power generation, users would have to pay about 3.5 per cent and 2.8 per cent more in net tariffs, excluding rebates, up to 2023.

CLP and HKE will be forking out HK$52.9 billion and HK$26.6 billion in capital expenditure over the next five years.

One project involves spending HK$2 billion to replace electricity meters with smart, digital ones that give users instant data on consumption. Another is to jointly invest in an estimated HK$6 billion offshore liquefied natural gas terminal that would enable the city to access more LNG from international markets at more competitive prices.

Currently, Hong Kong relies on a limited pipeline supply from mainland China.

“Has the government calculated the maths of using the HK$8.7 billion to fund the smart metering project and the offshore LNG terminal, thereby taking these two assets off the two firms’ balance sheets?” Wu asked. “This is an issue of making better use of public money.”

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According to the regulatory framework – or “scheme of control” – the two monopoly suppliers are permitted to earn no more than 9.99 per cent of their net fixed assets. This means the firm can, in theory, make more if they build more.

The figure is to be revised down to 8 per cent beginning in October and January under a renewed scheme.

Wu said his suggestion was akin to investing HK$8.7 billion in capital works projects and allowing the city to reap the 8 per cent returns, rather than the power companies. “This could alleviate the public’s pressures over annual tariff increases and the benefits will last more than five years.”

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He said the government should be investing in basic smart-city infrastructure such as smart electricity and water meters, rather than pushing them onto private utilities and making residents foot the bill through higher tariffs.

Michael Tien Puk-sun of the political party Roundtable, said officials should instead study long-term subsidies to the public to keep electricity tariffs from rising above 2 per cent annually, beyond the five year time frame.

“The government will have to think of how to cover that difference in the long-run,” he said. “To do this, you’ll have to intervene and closely monitor the two firms’ fuel contracts. If not, their commercial decisions will directly affect resident’s power bills.”

Secretary for the Environment Wong Kam-sing called Wu’s idea “new thinking” but stressed the subsidies were needed to help residents, especially low-income households, shoulder the burden of tariff increases over the next five years. Tien’s suggestion was complex and needed to be further looked into, Wong added.

In response, Wu said: “Looking at opportunity cost is not a new form of thinking”.

According to the subsidy proposal the government would grant relief of HK$3,000 over 60 months – HK$50 per month – to each household. Wong claimed it would help offset most of the tariff increases for the five year period.

But neither Wong nor his deputies have been able to explain how the figure was derived.

“Why not HK$100 or HK$200?” asked Prentice Koo Wai-muk, of green group 350 Hong Kong on a radio programme on Wednesday. “There is too little information and they have provided not more than 100 words to approve an HK$8.7 billion proposal.”

Additional reporting by Xinqi Su