LCQ12: Adjustment of electricity tariff

     Following is a question by the Hon So Cheung-wing and a written reply by the Secretary for Environment and Ecology, Mr Tse Chin-wan, in the Legislative Council today (December 14):
     As indicated in the findings of the latest Annual Tariff Reviews released by the two power companies at the end of November this year, the average net tariffs of the CLP Power Hong Kong Limited and the Hongkong Electric Company, Limited to be effective in January next year show a respective rate of increase of about 6.4 per cent and 5.5 per cent when compared with the relevant figures in November this year, and with the year-on-year rate of increase in average net tariff standing at about 19.8 percent and 45.6 per cent respectively. There are views that as the epidemic in Hong Kong has yet to recede, and the local economy is still recovering, the two power companies' substantial increase in electricity tariff resulting from the persistent surge in fuel clause charge will impose significant pressure on the operating costs of small businesses and the cost of living of the grassroots. In this connection, will the Government inform this Council:
(1) whether it will consider extending the Electricity Charges Subsidy Scheme and the Electricity Charges Relief Scheme which will expire respectively in May next year and by the end of next year, so as to alleviate the burden of electricity tariff on small and medium enterprises as well as the grassroots; 

(2) whether it will, in the future, facilitate the strengthening of cooperation between the two power companies and the Mainland, enhance the energy supply structure in Hong Kong, and explore channels for diversified fuel supplies, so as to alleviate the pressure on local tariff increase arising from the price surges in the international fuel market, thereby keeping the future rate of increase of tariff as low as possible; and

(3) whether it will expedite the exploration with the two power companies the possibility of connecting with the power grids in the Guangdong-Hong Kong-Macao Greater Bay Area, with a view to ensuring the long-term supply of more clean energy from the Mainland to Hong Kong, thereby alleviating the reliance of the two power companies on the international fuel market, reducing their expenditure on fuel purchase, and benefitting businesses and members of the public?

     In the past two years, international energy prices kept surging, with individual market prices of crude oil, natural gas and coal registering an increase of 100 per cent, 200 per cent and 500 per cent respectively. Amid the energy crisis aggravated by the conflict between Russia and Ukraine since earlier this year, international fuel prices have accelerated rapidly. This has taken a heavy toll on electricity tariffs worldwide, and Hong Kong is no exception.
     Nonetheless, under the current economic atmosphere, the Government believes that the power companies should shoulder the social responsibility and use the best endeavours in riding out the difficulties together with the public. Therefore, in multiple rounds of negotiations on the 2023 tariff adjustments, the Government expressly requested the power companies to mitigate the increase in tariffs in their best endeavours, including lowering the permitted return profits and using the performance incentives under the Scheme of Control Agreements to alleviate the increase in tariff. The power companies eventually agreed to transfer out hefty resources from the Tariff Stabilisation Fund and continue to carry substantial deficit balances in their Fuel Clause Recovery Accounts, with a view to lowering the tariff increase in the coming year which is principally due to the rise in international fuel prices.
     We fully understand the concerns and worries of the society about the large increase in tariff. Besides continue appealing to the power companies to shoulder their social responsibilities, the Government will explore various measures to stabilise electricity tariffs in the future, including developing a diversified fuel mix, raising the share of renewable energy in the fuel mix for electricity generation, as well as collaborating with neighbouring regions for development or supply of zero-carbon energy and electricity.
     My reply to the Hon So Cheung-wing's question is as follows:
(1) We are aware of the grassroots' concerns over electricity tariffs. In order to alleviate the impact of using greener fuel for electricity generation on electricity tariffs, the Government has been providing a monthly relief of $50 since 2019 for each eligible residential electricity account until the end of 2023. In addition, a new round of electricity charges subsidy of $1,000 in total was provided for each residential electricity account in June this year until May next year to ease the economic pressure faced by members of the public under the pandemic. The power companies also agreed to provide special rebates or subsidies under their respective Community Energy Saving Funds to minimise the impact of tariff increase on disadvantaged groups and small and medium-sized enterprises. Nevertheless, we must emphasise that international energy prices are affected by an array of factors and the future outlook is still highly uncertain. Relying solely on provision of subsidy by the Government is not a long-term sustainable option, and it will end up with a heavy burden on public finance. The best way to tackle the issue is to save energy. While the tariff per unit will inevitably increase, the actual expenditure on electricity consumption can be maintained or even reduced by saving energy. The prevailing technology allows ample room for electricity saving. All sectors of our community can also join hands to save energy by making changes in electricity consumption patterns and lifestyle choices. These result in energy consumption at the global level as well as electricity expenses being reduced altogether, hence offsetting the impact of fuel cost increases.
(2) and (3) Hong Kong has been meeting its electricity demand through importing fuel for local electricity generation or importing electricity from the Mainland. The objectives of the Government's energy policies are to ensure that energy needs of the community are met safely, reliably and efficiently at reasonable prices, and to minimise the environmental impact.
     The current energy crisis has the greatest impact on coal prices, and relatively less impact on natural gas prices. In addition, as the prices of nuclear power are relatively stable, it has played certain role in lowering the increases in fuel cost adjustments amid the energy crisis.
     As requested by the Government, the two power companies have gradually been replacing coal with natural gas as fuel in electricity generation. At present, natural gas is the major fuel used for electricity generation, accounting for around half of the fuel mix. Nuclear power imported from the Mainland accounts for about 30 per cent of the mix, and the remaining is primarily coal. The two power companies are jointly constructing an offshore liquefied natural gas (LNG) terminal in Hong Kong waters, which is expected to be commissioned in 2023. The project will enable the power companies to purchase LNG from international markets direct, thereby enhancing their bargaining power and reducing the pressure on tariff caused by fluctuation in natural gas prices.
     Strengthening regional co-operation is equally important in promoting transformation towards low-carbon energy and stabilising electricity tariffs. Through its Clean Energy Transmission System (CETS), CLP Power Hong Kong Limited (CLP) connects its electricity system to the power network of the China Southern Power Grid and the Daya Bay Nuclear Power Station (DBNPS) and has been importing nuclear power from the DBNPS via the CETS since 1994. The Government also approved CLP to enhance its CETS under the company's 2018-23 Development Plan by replacing some 160 kilometres of overhead lines, which have been used for nearly 30 years, with lines that have higher transmission capacity so as to enhance the overall reliability and transmission capacity of the system. The project, expected to be completed by 2025, will provide Hong Kong with greater flexibility to import more clean energy in the long term.
     The Government has devised the decarbonisation strategy of "Net-zero Electricity Generation" in Hong Kong's Climate Action Plan 2050 promulgated last year. Under the overall target of achieving carbon neutrality by 2050, we must progressively increase the use of zero-carbon energy for electricity generation. In this connection, the Government, together with the power companies, will explore ways to enhance regional co-operation and identify sources of zero-carbon energy in neighbouring regions, including seeking joint investment and development opportunities for participating in and operating zero-carbon energy projects near Hong Kong, thereby enabling Hong Kong to use more clean fuels, progressively rely less on fossil fuel in electricity generation and reduce emissions from power plants.

Ends/Wednesday, December 14, 2022
Issued at HKT 14:17