CLP

Thursday, 07 March, 2013, 12:00am

Comment›Insight & Opinion

LEADER

SCMP Editorial

The warning of hefty tariff increases by the city’s top energy supplier is a case of déjà vu. After imposing a 5.9 per cent tariff increase early this year, CLP reiterated that electricity prices could rise 40 per cent within a few years, saying the switch to natural gas has pushed up fuel costs. The gloomy picture should not come as a big surprise. The power giant first sounded the warning last year after being forced to cut back its annual increase substantially. The rhetoric is nothing new but it is guaranteed to generate outrage, coming from a monopoly that earned HK$8.3 billion last year.

It does not take an expert to tell that clean energy comes at a price. For the sake of a better environment and public health, households and businesses should be prepared to pay more under the user-pays principle. The company is perhaps just being frank about rising costs as it uses more natural gas. Tariff increases appear to be inevitable. The question is how much more people are willing to pay, and whether there is an effective mechanism to ensure the company is not charging more than it should.

Regrettably, energy users are not in a position to tell whether the increase sought by the utility every year is justified or not. A deal with the government currently guarantees CLP and Hongkong Electric a 9.9 per cent rate of return annually on their investment. The so-called scheme of control, a colonial legacy in which utilities are promised hefty profits in return for reliable services, will stay at least for another five years. It is difficult to see how such a sweet deal can be preserved amid growing pressure for tighter government monitoring of public utilities.

Announcing an 11 per cent drop in profits, the company vowed not to accept any “unfair or one-sided” changes to the agreement. It is true that the political environment has put CLP and other public utilities in an increasingly difficult position. But the days of lucrative business deals have long gone. While the company is entitled to reject unfair terms, the public is also unlikely to swallow deals that put commercial gains ahead of public interest.

The century-old company prides itself on being socially responsible. It should take into account the affordability of its services when adjusting tariffs. A strong balance sheet and good business prospects mean the company is in a position to adopt measures to ease the impact on users. Officials are also expected to play a better gate-keeping role on adjustments.

COMMENTS

so who negotiated the current Scheme of Control from the Government’s side to sign the bilateral contract ? was that Edward Yau ? Seems like CLP is just asking for what was agreed in the contract. Was it Edward Yau who signed off on the renewed KMB and Citybus / NWFB bus franchises as his farewell from his failed tenure as ENB Secretary ? why does he still have an overpaid office manager job in Government ?

Source URL (retrieved on Mar 7th 2013, 6:13am): http://www.scmp.com/comment/insight-opinion/article/1183963/hong-kong-needs-rethink-power-companys-sweet-deal

Energy giant CLP is ready to fight any “unfair” move to rewrite the deal that governs its profits, but it is also pointing to hikes in electricity over the next few years.

Kelly Ip and Victor Cheung

Tuesday, February 26, 2013

Energy giant CLP is ready to fight any “unfair” move to rewrite the deal that governs its profits, but it is also pointing to hikes in electricity over the next few years.

The line was drawn yesterday as the electric company reported an 11 percent drop in earnings last year to HK$8.31 billion.

It comes ahead of a interim review of the pact that CLP has with the government – the scheme of control – that allows it a maximum profit of 9.99 percent.

CLP will approach discussions “in a constructive and open-minded spirit,” a statement read. But it “will not be ready to accept amendments which are unfair or one-sided and which run counter to the fundamental character of the SoC agreement as a binding contract.”

There have been calls for government officials to review the maximum profit after the power company raised its tariff by 5.3 percent from January 1 this year. On that, CLP chairman Michael Kadoorie blamed an increase in the cost of natural gas plus a need to use more of it for clean energy production. That includes hitting an official target to cut emissions by reducing the use of coal for generating electricity.

“Fuel costs alone will increase by around 250 percent between 2011 and 2015 because CLP will be required to use twice the current volume of natural gas,” Kadoorie said.

“The cost of this gas will be three times the price of gas secured 20 years ago.”

So Kadoorie hopes officials will extend the scheme of control pact by five years beyond 2018 so that the CLP can continue “to invest in the future.”

The vice chairwoman of CLP Power Hong Kong, Betty Yuen So Siu-mai, said the group sees tariffs increasing from 30 to 40 percent.

“We will try to delay the tariff hikes as much as we can,” she said, “but the upward direction has little room for change.”

She did not directly respond to questions on whether CLP is “threatening” the government ahead of any talks for extending the agreement, but she did remark that there is “sufficient time” for both sides to forge a deal and ensure stability in the supply of power. She also denied that CLP would consider pulling out of Hong Kong if the review of the scheme of control does not go as the company wants.

That it has already stated it is ready to buy Exxon Mobil’s 60 percent holding in the Castle Peak power plant “shows CLP’s commitment to Hong Kong,” she said. CLP currently owns 40 percent of the plant.

And “CLP has been serving Hong Kong for the past 111 years,” Yuen added.

But Secretary for the Environment Wong Kam-sing was lukewarm to the idea of talking any time soon on extending the SoC scheme, saying it is too soon.

“Attention should be focused on the mid-term review of the scheme of control and the possibility to combine different kinds of energy sources,” he said.

Wong also said fuel costs in the international market have little bearing on the consumer price index in Hong Kong, though the administration would have to think on it some more if people at the grassroots were affected.

New People’s Party and Executive Council member Regina Ip Lau Suk- yee thinks the fact CLP has pointed to a need to raise tariffs is a negotiating tactic.

“I believe CLP understands they will face criticism from society if they are to raise tariffs,” she said.

Larry Chow Chuen-ho, director of the Hong Kong Energy Studies Centre at Baptist University, remarked: “I don’t think the maximum profit of 9.9 percent can be amended easily.”

And in a Legislative Council panel meeting, the administration suggested that a 3.6 percent tariff increase by Towngas from April 1 could be viewed as “moderate.”

It is estimated that about 78 percent of Towngas domestic customers will pay no more than an extra HK$10 a month, and charges for low-income groups such as the elderly, disabled and single-parent families will remain unchanged.

Submitted by admin on Feb 26th 2013, 12:00am

News›Hong Kong

ENERGY

Anita Lam and Cheung Chi-fai

The city’s largest power supplier, reiterating its claim that electricity prices could rise 40 per cent within a few years, yesterday urged the government to make a timely decision on whether to extend its regulatory regime on the scheme’s expiry in 2018.

The government has begun an interim review of CLP Holding’s scheme of control, which determines the company’s permitted return. But the group’s chief executive, Andrew Brandler, warned that they would not accept any amendment which was “unfair or one-sided”. The company said it would take more than 20 years for a power company to plan for its facilities.

The power company has come under repeated government and community pressure to reduce its tariff hike. CLP’s chairman, Michael Kadoorie, has said more than once that they also faced immense pressure as fuel costs surge by 250 per cent in the five years to 2015.

CLP will be required to use twice the current volume of natural gas, and the cost of this gas will be three times the price of the gas secured 20 years ago

“CLP will be required to use twice the current volume of natural gas, and the cost of this gas will be three times the price of the gas secured 20 years ago,” Kadoorie wrote in the company’s annual report released yesterday. “This is the equivalent of a 40 per cent increase in overall cost to consumers and will require regular and, at times, substantial tariff increases over several years.”

But secretary for the environment Wong Kam-sing said rising fuel costs were a problem for all. “The fuel price increase is a global trend and it is a question we must [all] think about.”

An analyst said CLP may propose a big tariff hike next year when the company lifted the use of the expensive natural gas to replace coal.

William Yu Yuen-ping, chief executive of World Green Organisation, said the firm was preparing the public for a future price hike with repeated warnings.

“The public might get numb about the warning and accept a level a bit lower than previously warned,” he said.

Topics:

CLP

Michael Kadoorie

regulatory extension

From: CLP News [mailto:CLP_News@clp.com.hk] Sent: 21 December, 2012 19:28 To: energy@cleartheair.org.hk Subject: 西氣東輸二線天然氣供港協議獲通過

Second West-East Gas Pipeline Gas Supply Agreement Approved

Dear Friends,

Subsequent to our announcement made last week on the 2013 tariff adjustment, I would like to give you another update on CLP’s latest business development – the commercial agreement to bring natural gas from the Second West-East Gas Pipeline (WEPII) to Hong Kong has recently been approved by the Executive Council of the HKSAR Government.

CLP requires new gas sources to timely replace the existing Yacheng gas field which is depleting rapidly. The new gas supply is also essential for CLP to sustain a green power generation to meet government’s increasingly stringent emissions requirement beyond 2015 and to help raise the city’s air quality. According to PetroChina, WEPII is the largest energy investment project in the history of modern China. It is one of the three new gas sources for securing Hong Kong a long term and stable gas supply as contemplated under the Memorandum of Understanding on energy cooperation signed between the HKSAR Government and the Central Government in 2008. Following ExCo’s approval on the Gas Supply Agreement, WEPII gas will arrive Hong Kong early next year, opening a new chapter in Hong Kong’s clean power generation history.

For more details about the WEPII project and the related gas supply agreement, please refer to the enclosed press release or visit the following website:

https://www.clp.com.hk/ourcompany/news/currentrelease/Documents/20121221_en.pdf

Thank you for your continuous support and CLP will continue to provide a safe, reliable, environmentally-friendly and reasonably priced electricity supply for Hong Kong, as we always do. May I take this opportunity to wish you a Merry Christmas and a Happy New Year!

Best regards,

Quince Chong
Chief Corporate Development Officer
CLP Power Hong Kong Limited

各位朋友：

繼上星期向大家解說了2013年電費調整詳情之後，我希望再告知各位另一項關於中電的最新發展──中電就引入西氣東輸二線天然氣與供氣商所簽訂的商務協議，近日已獲行政會議通過。

為解決崖城氣田行將枯竭的問題，中電必須引入替代氣源令環保的天然氣發電能得以維持，以達致香港政府訂立2015年及之後更嚴謹的排放要求，協助提升香港的空氣質素。根據中國石油的資料，西氣東輸二線(西二線)是中國近代史上最大型的能源投資項目。在2008年香港特區政府和中央政府簽署的《能源合作諒解備忘錄》中，西二線被指定為三個輸港新氣源之一，以保證香港能獲得長遠穩定的天然氣供應。在供氣協議獲行會通過後，西二線天然氣將於明年初輸港，為本港環保發電開展新一頁。

有關西二線天然氣供港項目和供氣協議的重點，請參考附上的新聞稿或瀏覽以下網址：

https://www.clp.com.hk/ourcompany/news/currentrelease/Documents/20121221_tc.pdf

多謝閣下一直的支持！中電定將克盡己任繼續為香港提供安全可靠、環保和價格合理的電力供應。順祝各位聖誕及新年快樂！

中華電力企業發展總裁
莊偉茵謹啟
‘The World is in Our Hands’ – Think before you print

Disclaimer:

This e-mail is intended for the addressee(s) only. It is privileged and may also be confidential.
Any copying, modification, retransmission or other use of this e-mail or the information
contained therein without CLP approval is prohibited. If you are not the addressee(s) or have received this e-mail
in error, please contact the sender and delete this email from your computer systems.

Internet communications cannot be guaranteed to be timely, secure, error-free or virus-free.
The sender will not accept any responsibility for any errors or omissions contained in this e-mail.

Website: http://www.clpgroup.com

Download PDF : 20121221_en

20121221_tc

各位朋友：

中電今日下午剛向立法會議員進行匯報已提交環境局的2013電價調整方案，在此向各位簡介明年電價方案的主要內容。

我們理解市民對電價及鼓勵節能提出的訴求，因此在審慎考慮各方面的因素後，我們已經採取措施將2013年的電價調整維持在一個合理的水平。

1.     我們嚴格控制成本加上2012年炎夏帶動銷售，令2013年平均基本電價可維持不變。

2.     儘管燃料價格不斷上升，我們仍然能夠將燃料價條款收費加幅限於4.6仙。目前中電的天然氣供應主要來自南中國海的崖城氣田。因其快將枯竭，而即將引入來自「西氣東輸二線」的新天然氣將按國際市場價格釐定，是目前使用的崖城天然氣的三倍。崖城天然氣價格早於20年前簽訂，當時燃料價格比今天顯著為低。

3.     連同在2013年提供一次性地租及差餉特別回扣2.1仙，平均淨電價加幅為5.9%。

4.     中電希望可以協助低用量客戶和鼓勵客戶節能，推出新的「節能回扣」計劃。在計劃下，每兩個月使用少於400度電的住宅客戶，以及每個月使用少於400度電的小型商業客戶將可獲電費回扣。

5.     在新的電價方案下，約有70萬個家庭(即35%的住宅客戶)和約13萬的小商戶(即44%的商業客戶)的電價將不受影響，甚至有輕微的減幅。

在調整後，香港電價仍然遠低於新加坡及澳洲悉尼等國際城市。縱然如此，我們仍會緊守崗位為香港提供安全可靠、環保和價格合理的供電。

中電同時亦會繼續推動關懷社區的計劃，包括於2013年推出關顧社區津貼計劃，為符合資格的低收入家庭提供一次性300元津貼，預計將會減輕中電服務地區內3萬個家庭的電費負擔。

有關電價調整的詳情，可參考附上的新聞稿或登入下列網址：

https://www.clpgroup.com/ourcompany/news/currentrelease/Documents/20121211_tc.pdf

多謝閣下的支持！

中華電力企業發展總裁

莊偉茵謹啟

Dear Friends,

I would like to give you an update on the CLP 2013 Tariff Review Proposal that we submitted to the Environment Bureau, which was presented to members of the Legislative Council this afternoon.

We fully understand the community’s concerns on electricity tariffs and the need for energy conservation. We have therefore taken a number of factors into consideration and put forward measures to contain the 2013 tariff adjustment to a reasonable level.

1. CLP has managed to maintain its Average Basic Tariff for 2013 unchanged due to stringent cost control and higher electricity sales as a result of the hotter weather in 2012.
2. Despite rising fuel costs, CLP has managed to contain the increase in the Fuel Clause Charge to 4.6 cents. CLP’s main natural gas supply, from the Yacheng field in the South China Sea is depleting fast and our replacement supplies will come from the new second West-East Gas Pipeline. The new gas price, which is priced in line with current international benchmarks, is three times that of the existing gas supply, which was contracted 20 years ago when fuel prices were significantly lower.
3. The average net tariff increase for 2013 will be 5.9%, after taking into account an adjustment to the Rent and Rates Special Rebate, which will be at 2.1 cents.
4. To help low consumption customers and encourage energy efficiency, we are introducing the new Energy Saving Rebate Scheme. Under this Scheme, domestic customers using 400 units or less on a bi-monthly basis and small business customers using 400 units or less per month can enjoy savings in their electricity bills.
5. The new tariff will result in 35% of domestic customers (about 700,000) and 44% of small business customers (about 130,000), seeing no increase or even enjoying a small reduction in their electricity bills, depending on their consumption level.

After the tariff adjustment, Hong Kong’s electricity tariff level is still much lower than that of other World cities such as Singapore and Sydney. We will continue to provide safe, reliable, environmentally-friendly and reasonably priced electricity supply for Hong Kong, as we always do.

CLP will also continue to expand its community support footprint including the introduction of a one-off community care subsidy, at HK$300 per eligible household, for targeted grassroots families in its service area in 2013, a move that is expected to alleviate tariff pressure for thirty thousand families.

For details of the tariff package, please refer to the attached press release or visit CLP’s website at:

https://www.clpgroup.com/ourcompany/news/currentrelease/Documents/20121211_en.pdf

Thank you for your support!

Best regards,

Quince Chong
Chief Corporate Development Officer
CLP Power Hong Kong Limited
‘The World is in Our Hands’ – Think before you print

Disclaimer:

This e-mail is intended for the addressee(s) only. It is privileged and may also be confidential.
Any copying, modification, retransmission or other use of this e-mail or the information
contained therein without CLP approval is prohibited. If you are not the addressee(s) or have received this e-mail
in error, please contact the sender and delete this email from your computer systems.

Internet communications cannot be guaranteed to be timely, secure, error-free or virus-free.
The sender will not accept any responsibility for any errors or omissions contained in this e-mail.

Website: http://www.clpgroup.com

Download PDF : 20121211_TC

Download PDF : 20121211_EN

South China Morning Post