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January, 2008:

Power Companies Agree To Reduce Tariffs

SCMP Lina Lim
7:00pm, Jan 07, 2008

The government on Monday entered an agreement with the territory’s power companies – in the wake of community concern about utility fee rises scheduled for early 2008.

The two power companies are the China Light Power Company and Hong Kong Electricity Company.

The government said that under the new agreement, the rate of return of the two utility companies would be reduced to below 10 per cent to ease the public’s monthly electricity bills.

Secretary for the Environment Edward Yau Tang-wah said the new agreement would help allay community concerns gathered from two public consultations in 2005 and 2006. The new agreement would also be in line with the government’s environmental policies.

“I firmly believe that the new agreements have achieved a reasonable balance. On the one hand, we have responded to public aspirations for reduced tariffs.

On the other hand, the permitted rate of return under the new agreements will provide sufficient incentive for the power companies to continue investing in the electricity supply,” Mr Yau said.

Under the new agreement, the permitted rate of return of the two power companies would be reduced from the existing 13.5 per cent to 15 per cent to 9.99 per cent.

Customers of China Light Power Company and Hong Kong Electricity Company would see reductions in basic tariffs from October 1 this year, and January 1, next year, respectively.

However, the reductions would depend on the balance of the average net fixed assets of the two companies and their operating costs upon commencement of the new agreements.

“Based on the balance of the average net fixed assets of the two power companies for 2006, the total reduction in electricity payments for residential and commercial customers can amount to HK$5 billion annually,” Mr Yau explained.

Emission reductions are also an aim of the new agreements. If the power companies exceed the emission cap for any pollutants agreed upon, their rate of return would be cut by 0.2 to 0.4 percentage points depending on their actual emission levels. A maximum penalty of HK$200 million to HK$300 million would also be imposed.

Mr Yau said the government would also offer incentives. If emissions by the companies were kept below the stated caps, then an increase of 0.05 to 0.1 percentage points would be awarded.

“This also strikes a balance between the environmental obligations of the power companies towards our air quality as well as providing them with a stable operating environment,” he explained.

The environment minister said the government wanted to expand the electricity market to encourage friendly competition.

Studies on open market models and the regulatory frameworks, as well as enhanced interconnection between the grids of the two power companies, would be carried out in the next regulatory term.

“On the preparation for an open market, the tenure of the new agreements will be reduced from the existing 15 years to 10 years,” Mr Yau said.

Black Point Power Station Gets New License

Hong Kong’s Black Point Power Station Gets New License

January 3, 2008 – China CSR

Hong Kong’s Environmental Protection Department issued a renewed license for the Black Point Power Station at the end of December 2007.

“The renewed licence under the Air Pollution Control Ordinance will come into effect tomorrow (January 1) and remain valid until the end of 2009,” said an EPD spokesman in an issued press release. “Having regard to the need to keep the emissions to the minimum and the current level of natural gas supply, the emission caps of the Black Point Power Station will be maintained at the current levels. As natural gas for power generation emits significantly less air pollutants than coal-fired units, it is the Government’s policy to encourage the use of natural gas in place of coal to reduce emissions. For this purpose, we have provided in the licensing conditions for an increase in the use of natural gas at the Black Point Power Station whenever this is become feasible.”

The spokesman also said when there is an increase in electricity generation due to increase in the use of natural gas at the Black Point Power Station, the increase in emissions at the station has to be offset by a corresponding reduction at the Castle Peak Power Station by a ratio ranged between 5.6 to 58 times, depending on the particular different pollutants.

Hong Kong’s also tightened the emissions cap for the Castle Peak Power Station ein early 2007, effectively bringing down the emission of air pollutants from the power plants. To improve air quality, Hong Kong reached a consensus with the Guangdong Provincial Government in April 2002, to reduce, on a best endeavor basis, the emission of four major air pollutants — sulphur dioxide, nitrogen oxides, respirable suspended particulates and volatile organic compounds — by 40%, 20%, 55% and 55% respectively in the region by 2010, using 1997 as the base year.

To achieve the reduction targets, Hong Kong says it has implemented a series of measures to improve air quality, including the tightening of fuel and vehicle emission standards, requiring the retrofitting of emission control device to trap the particulate emission from diesel vehicles, strengthening vehicle emission inspections and enforcement against smoky vehicles, incentivizing early replacement of old diesel commercial vehicles with vehicles that comply with Euro IV standard, encouraging the use of environment-friendly vehicles through tax concession, limiting the emissions of volatile organic compounds from paints, printing inks and consumer products, requiring the installation of vapour recovery systems in petrol filling station and tightening the emission control on power stations.

CLP Plant Can Flout Pollution Cap

Cheung Chi-fai
Updated on Jan 01, 2008 – SCMP

Limits on the amount of pollution CLP Power’s gas-fired power station may emit have been renewed, but with the proviso that the company may breach them if it reduces pollution from its coal-fired turbines.

The Environmental Protection Department said the proviso was intended to encourage the company to use more gas.

“This offsetting arrangement will ensure a greater net reduction of the overall emissions from power generation, which is the biggest local source of air pollutants,” a spokeswoman for the department said.

However, CLP Power says it faces a shortage of gas supplies – the reason for its application to build a liquefied natural gas terminal on South Soko Island, in a marine reserve off Lantau, to receive overseas gas supplies shipped by tanker.

There are no figures for its output of pollutants last year, but it announced in December 2006 that the proportion of electricity it would generate in 2007 from gas would drop by a third to conserve supplies from its Yacheng gas field off Hainan , and that it would burn more coal, pushing up emissions.

The power station at Black Point, Tuen Mun, will be allowed to emit 520 tonnes of sulfur dioxide, 5,200 tonnes of nitrogen oxides and 65 tonnes of particulates per year this year and 2009. In 2006, the latest year for which figures are available, emissions of sulfur dioxide and nitrogen oxides came in far below the caps, at 180 tonnes and 1,962 tonnes respectively, but particulate emissions, at 70 tonnes, breached the cap.

The cap extension was announced as the deadline for agreement between the government and Hong Kong’s two electricity suppliers on new scheme-of-control agreements regulating profits on their investments passed without a deal.

“The talks have been very difficult. So far there is no comprehensive and concrete agreement,” a source close to the negotiations said. The source would not say whether the talks would be extended.

The government had said earlier that if the deadline passed without agreement, it intended to draft a law to regulate the companies.

Tso Kai-sum, managing director of the other power generator, Hongkong Electric, said three weeks ago that a deal was close.

Both companies were tight-lipped yesterday over the talks.