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Following is the speech delivered by the Financial Secretary, Mr Donald Tsang, in introducing the Government Minute responding to the Report No.33A of the Public Accountants Committee in the Legislative Council today (Wednesday):

Madam President,

Laid on the table today is the Government Minute responding to Report No. 33A of the Public Accounts Committee (PAC). In the report, the PAC present their conclusions and recommendations on -

(a) the Government's monitoring of electricity supply companies; and

(b) the follow-up review of the year 2000 problem.

The Minute sets out the measures the Administration is taking in response to these conclusions and recommendations.

The issue about the excess generating capacity of CLP has been the subject of much discussion at the hearings of the PAC. The Administration has already explained how it exercised due diligence in scrutinising CLP's financing and development plans under the Scheme of Control Agreement in 1992. We have also explained at length why it is not possible to forecast electricity demand with 100% accuracy and why the Government considered that the Modified Gas Option proposed by CLP the most economical and environmental-friendly option based on best information available at the time. More background information is provided in the Government Minute being tabled and I do not intend to repeat the details here.

What I would like to highlight is that like the PAC and the general public, the Administration has been very concerned about the level of excess generating capacity of CLP in the past few years. Well before the Director of Audit and the PAC started to look into it, the Administration had already taken active steps to address the issue. These include requesting CLP to defer some of its generating units at Black Point and decommissioning some diesel-fired turbines at Castle Peak and Tsing Yi in 1995, 1997 and 1999 to reduce its excess generating capacity. Furthermore, during the 1997/98 review of the Scheme of Control Agreements, Government has agreed with the two power companies a new mechanism for approval of additional generating capacity in future to provide greater safeguards for the protection of consumers' interest.

In addition to the above measures, we have continued to explore with the company whether more could be done to lower the cost of electricity to its customers. Following discussion with the Government, CLP announced yesterday its decision to forego its permitted return on the outstanding balance of the deferral premium for Black Point Units 7 and 8 amounting to $803 million. This would reduce the cost of electricity to CLP's customers. According to Scheme of Control calculations, the net benefit is estimated to be about $2.3 billion on a nominal basis over the estimated 25-year useful life of the units. We welcome this positive move by CLP which will benefit its customers.

I should emphasise that it has been the objective of the Government that the power companies should take measures to keep the cost of electricity as low as possible while maintaining reliability of electricity supply. The Government's efforts aim at safeguarding the interests of electricity users.

On the year 2000 problem, we are pleased to see that Hong Kong has not encountered any major Y2K-induced incidents since the rollover to year 2000. All essential public services have continued uninterrupted and unscathed by the century date change. The very smooth and orderly rollover of Hong Kong as a whole to the new millennium is attributable to the collective efforts of the entire community, in tackling the Y2K challenge, in particular the comprehensive preparations made by all government departments concerned and essential service providers. This council has during the past two years followed closely the progress of Y2K compliance work undertaken by Government and the essential services sectors. I would like to take this opportunity to thank Members for their interest in this very important subject and the useful comments and suggestions they have put forward to the Administration.

Madam President, we have no doubt that the PAC's contribution is enormous. We shall co-operate fully and respond positively to any constructive and sound comment from the Chairman and Members of the committee with a view to making this Government even more open, transparent and efficient.

End/Wednesday, March 1, 2000

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