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Following is a question by the Hon Frederick Fung and a written reply by the Secretary for Development, Mrs Carrie Lam (in the absence of the Secretary for the Environment), in the Legislative Council today (November 7):
Question:
The Government is discussing with the two power companies the post-2008 regulatory arrangements. It has been reported that the progress of the negotiations has been slow because of the substantial differences in stance between the Government and the two power companies over such matters as the term of the agreement, the rate of permitted return and the linking of the rate of return to emission caps. When attending a meeting of this Council's Panel on Economic Development last month, the Secretary for the Environment indicated for the first time that should no agreement be reached with the two power companies by the end of this year, the Government would regulate, by legislative means, matters relating to the electricity supply by the two power companies. In this connection, will the Government inform this Council:
(a) of the latest progress of the discussions with the two power companies on the post-2008 regulatory arrangements, including the consensus reached so far on such matters as the regulatory framework, the rate of permitted return, the mechanism for setting electricity tariff, emission reduction targets, the introduction of competitors and the use of renewable energy to generate electricity, and how they compare with the recommendations in the consultation paper on Future Development of the Electricity Market in Hong Kong (Stage II Consultation);
(b) of the details of regulation by legislative means, including the legislative timetable and the areas to be covered by the legislation; whether the preliminary legislative work has started; if not, how it ensures that the legislative process can be completed before the expiry of the existing Scheme of Control Agreements at the end of next year, so as to deal with the scenario in which no agreement on the new regulatory arrangements can be reached; and
(c) apart from regulation by legislative means, what other contingency measures are in place to deal with the scenario in which no agreement can be reached?
Reply:
Madam President,
(a) The Government and the power companies have already discussed in detail the new post-2008 Scheme of Control Agreements (SCAs). However, up to this point in time, the two power companies have yet to accept the core terms put forth by the Government for the new SCAs, that is, shortening the duration of the SCAs from the existing 15 years to 10 years, with an option for the Government to extend for five years after review; lowering the permitted rate of return of the two power companies from the existing 13.5%-15% on Average Net Fixed Assets to an average of below 10%; and linking the permitted rate of return of the power companies to their achievement of the emissions caps imposed by the Environmental Protection Department under the Air Pollution Control Ordinance. As the negotiation is still on-going, it is not appropriate for the Government to disclose further details.
(b) The Government will continue to work hard towards reaching an agreement with the two power companies on the new SCAs before the end of this year. In parallel, we are preparing a piece of legislation to ensure that the public will continue to enjoy reliable, safe and efficient electricity supply at reasonable prices after the expiry of the existing SCAs. Should we fail to reach an agreement with the two power companies before the end of the year, the Government will introduce a bill into the Legislative Council early next year to regulate the power companies through a licencing mechanism.
(c) Should the Government and the two power companies fail to reach an agreement on the new SCAs before the end of the year, we will introduce into the Legislative Council a bill to regulate the two power companies early next year. We will spare no effort in assisting the Council's scrutiny of the bill, in order that the legislative process can be completed within the 2007-08 legislative year. This is to ensure that the public can continue to enjoy reliable, safe and efficient electricity supply at reasonable prices after the expiry of the existing SCAs.
Ends/Wednesday, November 7, 2007
Issued at HKT 16:00
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