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Following is a question by the Hon Tang Ka-piu and a written reply by the Secretary for Transport and Housing, Professor Anthony Cheung Bing-leung, in the Legislative Council today (March 25):
Question:
Some members of the public have relayed to me that the criteria currently adopted by oil companies in setting the retail prices of domestic liquefied petroleum gas (LPG), including central LPG and bottled LPG, lack transparency. Also, the Government has not clearly explained the procedure for selecting central LPG providers for subsidised housing estates/courts, making it difficult for the public to monitor the prices of domestic LPG and the quality of gas supply service. In connection with the use of Towngas and central LPG in subsidised housing estates/courts, will the Government inform this Council:
(1) whether it has fully grasped and regularly monitors various oil companies' price data on domestic LPG, including changes in costs, as well as import and retail prices; if so, of the details;
(2) of the Home Ownership Scheme courts, courts under the Private Sector Participation Scheme, public housing estates and estates under the Hong Kong Housing Society (HKHS) which are currently using Towngas and central LPG respectively (set out such information in a table);
(3) of the criteria adopted by the authorities for determining, during construction of subsidised housing estates/courts, whether Towngas or central LPG will be used in such estates/courts in future; given that Fu Ning Garden in Tseung Kwan O, which was available for intake in 1990, uses central LPG while On Ning Garden in Tseung Kwan O, which was available for intake in 1991, uses Towngas, why these two subsidised housing courts with years of intake and locations being so close to each other use different domestic fuels; and
(4) of the method (e.g open tender) adopted by the Hong Kong Housing Authority and HKHS for selecting central LPG providers for their housing estates/courts?
Reply:
President,
Energy supply is under the policy purview of the Environment Bureau.
Regarding the use of Towngas and piped liquefied petroleum gas (LPG) in public housing estates/courts, with inputs from the Environment Bureau, my replies to the Hon Tang Ka-piu's questions are as follows:
(1) The prices of domestic LPG (including piped LPG and cylinder LPG) have all along been determined by individual oil companies having regard to commercial practices and their operating costs. However, the Government understands and is concerned about the impact of LPG prices on the public and therefore encourages the industry to enhance transparency on price setting.
Since 1999, a major local LPG supplier (the Company) has established a price adjustment mechanism of domestic LPG on its own initiative, to enhance the transparency of price setting. The Government understands that the adjustments of listed prices of piped LPG and wholesale prices of cylinder LPG of other oil companies in the market generally follow those of the Company. Their price adjustments are therefore very close to each other.
In monitoring domestic LPG prices, the Government all along makes reference to the movement of international LPG prices (calculated based on Saudi Arabia monthly exporting Contract Price) (Note 1) and local LPG import prices, and assess whether the Company's price forecasts are reasonable. The Government will also regularly meet with the Company during its price review to discuss and provide views on its price forecasts; and follow up with the Company on its positive or negative price adjustments due to the difference between actual and forecast price in its last review, and assess whether its annual adjustment of the operating cost is reasonable.
Under the above price adjustment mechanism, the Company has, since mid last year, adjusted the price of domestic LPG three times, at end July and end October 2014 as well as end January 2015. The listed price of domestic piped LPG has reduced by around 20% from $38/cubic metre at the beginning of July 2014 to the latest price of less than $31/cubic metre. The wholesale price of cylinder LPG has also been adjusted by the same magnitude. Comparing to the LPG import prices of the same period ($7.29/kg for July 2014 and $5.81/kg for December 2014) (Note 2), the relevant adjustment magnitude is in tandem with the downward movement of the LPG import prices. The import price and retail price data of domestic LPG are set out at Annex A.
The Government will endeavour to ensure the reliability of energy supply, maintain an open market and remove barriers of entering the market in order to enhance competition.
(2) Information on the types of fuel gas adopted in the public housing developments undertaken by the Hong Kong Housing Authority (HA) and subsidised housing by the Hong Kong Housing Society (HKHS) are at Annex B.
(3) and (4) To adopt piped LPG supply, it is necessary to construct a LPG storage compound within the site area concerned and provide a separation zone between the compound and residential units in accordance with the relevant safety requirements. This may affect the flexibility of land use and overall planning and result in substantial loss of available land for flat production, whereas adopting Towngas supply will not bring about such impact. Therefore, the HA would provide Towngas supply to residents as far as practicable. Given that some individual estates/courts are located in remote areas or Towngas supply might not be available at the time of construction, the HA would invite LPG suppliers to provide piped LPG supply through open tenders for these development projects.
Fu Ning Garden and On Ning Garden in Tseung Kwan O are Private Sector Participation Scheme (PSPS) developments. For earlier PSPS projects, no particular type of fuel gas supply was specified by the HA in the agreement with the developers. Hence, the developers could adopt Towngas or piped LPG supply according to the circumstances and prevailing market conditions at that time. A review was conducted by the HA in 1988. Thereafter, piped LPG supply could only be adopted in PSPS developments when Towngas was not available. Also, LPG supply contracts between the HA and LPG suppliers stipulated that the price paid by users shall be capped at the prevailing price level of the private market, and not more than the price paid by other LPG users in private properties.
Since the tender for the Fu Ning Garden development was issued before the aforesaid review, the developer had adopted piped LPG supply on consideration of the circumstances and prevailing market conditions at the time. Whereas, the tender for the On Ning Garden development was issued after the review and the developer had adopted Towngas supply in accordance with the HA's requirements.
As for HKHS, in constructing its housing developments, it will, depending on the site area and design of each development project, consider the provision of piped LPG or Towngas. Selection of the gas supplier will be conducted by way of open tendering.
Note 1: For details, please refer to www.emsd.gov.hk/emsd/eng/sgi/lpg_pub_price.shtml.
Note 2: Please refer to LegCo Paper No. CB(4)433/14-15(01).
Ends/Wednesday, March 25, 2015
Issued at HKT 14:46
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