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From The Standard

Timothy Chui and Bonnie Chen
Wednesday, September 24, 2008

Customers of CLP Power expecting bills to be about 10 percent cheaper are in for a shock - they will see only a 3 percent cut in prices when new tariffs come into effect next month.
CLP is to cut capital expenditure by 30 percent over the next five years under the new scheme of control negotiated with the government, resulting in what was estimated to be a 10 percent saving to consumers.

But the savings have been eaten up by global energy prices, according to Secretary for the Environment Edward Yau Tang-wah. “We are seeing a major upsurge in fuel costs, essentially coal for power generation. Since last July, coal prices have increased by more than 100 percent,” Yau said.

“As a result, CLP needs to recoup this part of the cost, which will bring down the 10 percent reduction by 7 percent. In net terms, CLP consumers will be enjoying a 3 percent reduction from October 1.”

The new scheme of control was approved by the Executive Council yesterday.

CLP’s five-year capital expenditure will be cut from a proposed HK$56.6 billion to HK$39.9 billion, which will be spent on expansion, development, maintenance and upgrades.

Yau said further basic tariff savings beyond 10 percent through the lowering of capital expenditure were not possible, as the company still had commitments to develop infrastructure at Kai Tak and West Kowloon.

CLP signed the new Scheme of Control Agreement in January under which the permitted rate of return was changed to 9.99 percent starting next month from the previous 13.5 percent to 15 percent.

CLP will also increase its fuel clause charge by 5.9 HK cents per kilowatt hour on October 1 to better balance its projected fuel clause account.

Offsetting the reduction in the basic tariff, the average net tariff including the fuel clause charge will be lowered from 91.1 cents per kilowatt hour to 88.4 cents per kilowatt hour.

There was dismay over the plan.

The Democratic Party’s Fred Li Wah-ming said he was disappointed by the low rate and urged CLP to show more transparency in their development plans.

“We were expecting a double-digit cut but it ended up with a single digit only and that is only 3 percent,” he said, adding rising fuel prices did not excuse the limited reduction.

“Our government cannot monitor coal prices. That means if prices keep on increasing then CLP can further hike electricity bills.

“I am worried Hongkong Electric will follow suit as coal power generation takes up 70 percent of its output, which is even more than that of CLP.”

The Democratic Alliance for the Betterment and Progress of Hong Kong’s Chan Kam-lam also expressed disappointment and urged the government to press CLP to provide more details about coal prices, its development plan and the tariff stabilization fund balance.

“Where will this large amount of money go? How can they reduce the tariffs by so little?” Chan asked.

Hongkong Electric is expected to reduce electricity charges when it renews its agreement on January 1.

The company is set to announce the cuts in December after discussions with the government.

CLP managing director Betty Yuen So Siu-mai said the city’s energy tariff remained close to 1998 levels in contrast to the 40 to 60 percent increases experienced by London, New York and Singapore.

She said the company’s fuel clause recovery account is expected to accumulate a deficit of more than HK$1 billion.

“Unless markets see a sustained downward price correction, we may have to adjust the fuel clause charge sometime next year,” she added.

Coalition to Monitor Public Transport and Utilities spokesman Richard Tsoi Yiu-cheong said he had expected reductions of up to 15 percent.

He accused CLP of a lack of sincerity and expressed doubts about the company’s future capital expenditure especially since it has already abandoned the plan to build a terminal on Soko Islands.

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