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LCQ3: Future tariff adjustment rate

     Following is a question by the Hon Cheung Kwok-che and a reply by the Acting Secretary for the Environment, Dr Kitty Poon, in the Legislative Council today (May 23):


     It has been reported that the Chairman of CLP Power Hong Kong Limited (CLP) ridiculed the Government on May 8 this year by saying that the West Kowloon reclamation and the site of the old Kai Tak Airport had been lying vacant for quite a number of years, and if the speed and efficiency of decision-taking and implementation by CLP in operating the electricity supply system for Kowloon and the New Territories had matched those standards, these areas would be in darkness today.  Quite a number of Members have pointed out that the remarks of CLP's Chairman were threats to members of the public and the Government.  CLP has estimated that fuel costs will increase in the coming few years and the rate of tariff increase will possibly go up to 40 per cent three years later.  In this connection, will the Government inform this Council:

(a) given that CLP increased its tariff by 4.9 per cent early this year and it now estimates a possible 40 per cent tariff increase three years later, whether the authorities have assessed the accuracy of such estimation of tariff increase; if they have, of the details; whether they have examined if the justifications for CLP to increase its tariff drastically in the coming few years comply with the provisions of the Scheme of Control Agreement; if they have, of the outcome;

(b) whether it has assessed if the establishment of the Tariff Stabilization Fund (TSF) is a total failure when with TSF, CLP still has to increase its electricity tariff by 40 per cent in the next three years; if it has, of the details; whether the authorities will review the mechanism of TSF; if they will, of the details; if not, the reasons for that; and

(c) given that CLP is a public utility and its electricity tariff is closely related to the livelihood of all people in Hong Kong and yet, it has been reported that CLP's senior executive has said that CLP would increase its tariff substantially in the future and has criticised the Government's excessive intervention in affecting the tariff and, as pointed out by some Members, he has made the aforesaid threatening remarks, whether it has assessed if the remarks of CLP's senior executive may cause the public to panic; if it has, of the details and the follow-up actions to be taken by the authorities on such remarks?


     Electricity supply is an important infrastructure to the society and necessary services for the public's daily life.  Electricity tariff also has an impact on the development of industries and businesses in Hong Kong as well as the daily expenses of domestic households.  The Government would therefore carry out stringently its gate-keeping duties in dealing with any electricity-related investment or tariff review proposals.  In my reply to Hon Kam Nai-wai's question just now, I have already set out the gate-keeping measures taken by the Government at two levels and in five focus areas.  I am not going to repeat them here, except to renew our commitment to sparing no efforts in performing our gate-keeping role in the future, as with the past few years.

     Our replies to the questions raised by the Hon Cheung Kwok-che are as follows:

(a) and (b) We will reply questions (a) and (b) together, which are related to the earlier remarks made by CLP on tariff hike in the future.  As the authority to monitor the operation of the two power companies and gate-keep electricity tariff adjustments, we are certainly very concerned about CLP's earlier remarks on tariff adjustments in the coming few years, and have made a prompt response.  We expect CLP to learn from the experience of the 2012 tariff adjustment exercise last year, start with internal scrutiny and cost control measures, submit its tariff proposal with sound justifications, and respond fully to queries raised by the Government in vetting its submission.

     We must stress that the Government's gate-keeping work at each tariff review will not be affected by any public statements made by any individuals.  The Scheme of Control Agreements (SCAs) clearly set out the mechanism for annual tariff reviews.  In proposing tariff adjustment, the two power companies must submit relevant information in accordance with the SCAs, provide justifications and supporting data, and respond fully to the queries raised by the Government.  We have been implementing strictly these gate-keeping measures and would continue to do so in the future.  When handling any such proposals, we will apply the gate-keeping measures in five focus areas with our best endeavour, so as to strike a balance among the objectives of electricity supply in Hong Kong, i.e. reliability, environmental-friendliness, safety and reasonable prices, so as to safeguard the interests of the public.

(c) Regarding the attitude of the relevant person in making his remarks as mentioned in the question, we note the comments and concerns of legislators, community organisations, and the general public over such remarks.  As what I have just said, the Government has made immediate response accordingly.  Irrespective of the attitude and objective of the remarks, when making annual tariff adjustment proposals, the two power companies are required to follow the mechanism as laid down in the SCAs to provide relevant information, live up to the Government's scrutiny at two levels and in five focus areas, and respond fully to the Government's queries and the community's opinions.

Ends/Wednesday, May 23, 2012
Issued at HKT 13:25


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