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LCQ2: Electricity tariffs of two power companies

     Following is a question by the Hon Tang Ka-piu and a reply by the Secretary for the Environment, Mr Wong Kam-sing, in the Legislative Council today (June 3):


     Between January 2009 and March this year, the average net tariffs of the Hongkong Electric Company Limited and the CLP Power Hong Kong Limited (the two power companies) increased respectively by 15 cents per kilowatt hour (kWh) from 119.9 cents per kWh to 134.9 cents per kWh (at an increase rate of 12.5 per cent), and by 25 cents per kWh from 89.2 cents per kWh to 114.2 cents per kWh (at an increase rate of 28 per cent). On the other hand, the Consumer Price Index (A) (CPI(A)) rose from 109.5 in December 2009 to 128.6 in February this year (at an increase rate of 17.4 per cent).  Some members of the public have relayed to me that the aforesaid increase rates for average net tariffs were close to or higher than that for CPI(A) in the same period, which have imposed a financial burden on them.  Regarding electricity tariffs, will the Government inform this Council:

(1) whether it knows, between January 2009 and March this year, the average monthly tariff expenditures of the residential electricity users of the two power companies, the average electricity tariffs per kWh and their increase rates in the period, broken down by consumption block based on bi-monthly electricity consumption (i.e. below 500 kWhs, 500 kWhs to below 1 000 kWhs, 1 000 kWhs to below 1 500 kWhs, 1 500 kWhs to below 2 000 kWhs and 2 000 kWhs or above); in the same period, the average monthly tariff expenditures of the commercial electricity users of the two power companies, the average electricity tariffs per kWh and their increase rates in the period, broken down by consumption block based on bi-monthly electricity consumption (i.e. below 2 000 kWhs, 2 000 kWhs to below 5 000 kWhs, 5 000 kWhs to below 10 000 kWhs, 10 000 kWhs to below 20 000 kWhs and 20 000 kWh or above);

(2) as the tariffs of residential electricity users are computed on a progressive basis while those of commercial users are calculated on a regressive basis, whether the authorities have assessed if such computation methods for tariffs will encourage commercial users to consume huge amounts of electricity, and result in residential users subsidising the electricity expenditures of commercial users; whether the authorities will consider providing the electricity charges subsidy again to residential users to alleviate their financial burden; and

(3) as it is learnt that the two power companies may purchase several gas-fired generation units in the coming few years to cope with the new fuel mix and emission standards, and power generation units are part of the assets of the power companies, whether the authorities have assessed if electricity tariffs will rise as a result; whether the authorities have studied the impacts on basic tariffs of lowering the permitted profit rate of the two power companies from the current 9.9 per cent to six per cent; if so, of the details?



(1) As CLP Power Hong Kong Limited (CLP Power) calculates electricity charges for its residential customers based on their total bi-monthly electricity consumption, we provide the relevant tariff information on a bi-monthly basis. Please refer to Annex.

(2) According to our understanding, there is no cross-subsidisation of electricity charges among the residential customers, small and medium enterprise customers, and non-residential customers with high consumption of the two power companies.

     The tariff structures of the two power companies are their own business decision.  They would make reference to factors such as the cost of electricity supply in serving different groups of customers, international tariff structures, environmental consideration, etc. in working out their tariff structures and avoid cross-subsidisation among different groups of customers.

     Facing competitive business environment, small and medium enterprise customers are expected to adopt all possible energy-saving measures to reduce their electricity expenditure. Using more electricity would only increase their operating costs. Thus, the current tariff structure will not encourage them to use huge amount of electricity.

     For commercial and industrial customers with high electricity consumption, their tariff structure primarily reflects the cost effectiveness of electricity supply. These customers may obtain electricity directly from high voltage power system, which could reduce the extra cost of transforming high voltage power to low voltage power. Moreover, these high electricity consumption customers usually draw high volume of electricity at centralised locations which require less network facilities. Hence, it is more economically effective and will lower the cost of electricity supply to these customers.

     Besides the energy charge based on electricity consumption, the two power companies also charge their commercial and industrial customers with high electricity consumption a "demand charge" based on their maximum power demand, i.e. the higher the demand, the higher the "demand charge" would be. Hence, there is also no incentive for these customers to consume huge amount of electricity.

     In any case, customers have to pay higher electricity charges for each extra unit of electricity consumed. The more electricity they consume, the higher electricity charge they have to pay.

     Regarding the electricity charge subsidy provided in the past, it was a one-off relief measure instead of a standing arrangement. The Government will consider the economic and financial situation of each year and at present there is no plan to provide the electricity charge subsidy.

(3) It is mentioned in the "Public Consultation on the Future Development of the Electricity Market" that the percentage of local gas generation will be increased to around 50 per cent of the total fuel mix in 2020. In order to increase the use of natural gas, we envisage that power companies will need to build a small number of additional gas-fired generation units. Together with the expiry of cheaper gas supply contracts entered into years ago, it is expected that the future electricity tariff will cost more than the present level.  

     The adjustment on tariff would depend on a host of factors, including the international oil price movement, fuel costs, the retirement schedule of generation units, the pace of capital investments, the cost of new infrastructure, etc. Moreover, electricity tariff in a particular year will also be affected by other factors including operation costs, sales volume, as well as movements in the Tariff Stabilisation Fund and the Fuel Clause Recovery Account. Thus, we are unable to estimate the tariff implications for any particular year regarding the proposals of new gas generation units or lowering the permitted rate of return.

     Thank you, President.

Ends/Wednesday, June 3, 2015
Issued at HKT 17:31


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