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Following is a question by the Hon Fred Li and a written reply by the Secretary for Economic Development and Labour, Mr Stephen Ip, in the Legislative Council today (April 9):

Question:

A recent investment research report pointed that the Hong Kong and China Gas Co. Ltd (Towngas) achieved a hefty 34% return on fixed assets last year, and the firm's share of the piped-gas market has already reached 70%. In this regard, will the Government inform this Council:

(a)whether it has examined Towngas's current share of the domestic gas market and estimated the firm's respective shares in five and ten years;

(b) whether it has assessed if monopoly has already existed in the domestic gas market; if the assessment result is in the affirmative, of the follow-up actions it will take;

(c)of the detailed content and scope of the study being conducted to examine the viability of introducing a common carrier system for natural gas, with a view to providing an additional choice in domestic gases; and

(d)whether, apart from entering into an Information and Consultation Agreement with Towngas for the purpose of increasing the transparency in tariff setting mechanism and justifications thereof, it will consider regulating Towngas's permitted level of return, gas tariff and related matters; if it will, of the details of its consideration; if it will not; the reasons for that?

Reply :

Madam President,

The Hong Kong and China Gas Company Limited (HKCG) does not have a franchise or any exclusive right to supply gas in the territory. It operates in an open market environment and is a publicly listed company. In 2000, Towngas accounted for about 63 % of the energy sold in the domestic water heating and cooking fuel market. As the company operates in an open market environment, its future market share will, among others, depend on the changing market conditions. The Government does not have a forecast of the company's market share in the coming five or ten years.

From the energy users' perspective, a choice exists and there is competition among Towngas, LPG and electricity. The scale of operation or a major market share per se does not determine whether a business is anti-competitive or not. The Government has no plan to regulate HKCG's rate of return or the tariff of Towngas.

The Government and HKCG have recently entered into a new Information and Consultation Agreement (ICA) relating to HKCG's core gas business and gas-related activities in Hong Kong to increase transparency in the HKCG's tariff setting mechanism. Under the new ICA, the company will provide the Government annually with its planned capital investment and expenditure on network repairs and maintenance in the coming financial year and the actual expenditure on these items in the preceding year. At the same time, to increase transparency, the company will provide information to the public in its annual publication (i.e. Towngas Corporate Information) on its operational efficiency, environmental awareness, and measures to enhance safety of the public and the gas supply system.

The primary objective of the Government's energy policy (including gas supply) is to ensure that consumers enjoy reliable and safe supplies of energy at reasonable prices. One key factor for the development and introduction of natural gas to Hong Kong at the household level is the availability of reliable, secure and affordable supply. We will continue to monitor the development of supply sources close to Hong Kong and conduct further detailed studies as appropriate.

End/Wednesday, April 9, 2003

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