December, 2015:

Fuel prices have plunged in the past year, yet CLP and HK Electric are only reluctantly offering a 1 per cent cut in power bills

Millions of households and businesses are understandably dismayed by the announcement on Tuesday that the city’s electricity suppliers, CLP and HK Electric, will cut tariffs by a miserly 1 per cent despite the dramatic fall in fuel prices over the past year. With the two power companies still making billions of dollars in profits each year, the tariff reductions are little more than a drop in the ocean.

Equally disappointing is the government’s failure to defend consumers’ interests. Speaking at the Legislative Council economic development panel on Tuesday, Secretary for the Environment Wong Kam-sing revealed that the two companies originally only intended to freeze their tariffs. The reductions, 0.9 per cent for CLP customers and 1.1 per cent for HK Electric clients, only came after the government intervened. It is regrettable that Wong considered the outcome acceptable. He let down those who legitimately expected steeper concessions.

To those who have become used to ever-increasing energy bills in recent years, the cuts, albeit modest, are a small step in the right direction. According to the companies, the tariff levels are expected to be frozen in 2017 if fuel prices stabilise.

But whether the cuts are deep enough is open to discussion. Lawmakers from across the political spectrum have rightly questioned whether there was still room for further reductions. The actual savings for most CLP and HK Electric customers come to only HK$4.40 and HK$7.50 a month, respectively. Given fuel prices have dropped significantly and that the power giants made HK$10 billion and HK$3.2 billion in profits last year, respectively, the public is entitled to ask why the cuts cannot be deeper.

The criticisms levelled at the government are justified. Under the scheme of control agreement with the two power firms, each of them is entitled to 9.99 per cent return on investment. The guaranteed profits means officials can only seek to influence tariff adjustments. Officials did not try hard enough to push for more concessions. The cuts fall short of the expectations of lawmakers and the community.

It is difficult to see how the scheme of control can continue in its present form. The lack of competition and guarantee of handsome returns have put customers in a disadvantaged position. A public consultation on the energy market has opened the door for changes when the scheme expires in 2018. Officials should seize the opportunity to put in place a better regime.

Source URL: http://www.scmp.com/comment/insight-opinion/article/1892236/hong-kongs-two-electricity-suppliers-can-afford-be-more

Households and businesses across the territory will see their cost of electricity reduced by about 1 per cent next year, driven by lower fuel clause charges as global energy prices continue to slide.

But lawmakers slammed the city’s two power suppliers for playing a “numbers game” believing there was massive room for further reductions given huge guaranteed profits and surpluses in what they’ve set aside to procure fuel.

Environment secretary Wong Kam-sing claimed the initial plan from the duo was to freeze rates but that he had pressed for them to be lowered. This is the first rate cut for both companies since 2009.

CLP Power, which supplies two million accounts across Kowloon, New Territories and Lantau, told the Legislative Council economic development panel yesterday that average net tariff rates would be reduced from 114.2 cents per kilowatt hour to 113.2 cents beginning January.

“Because of a significant drop in fuel prices, the impact of the fuel cost increase has been contained, enabling us to reduce our tariff for 2016.” said CLP boss Paul Poon Wai-yin. The rate could be kept in 2017 if energy prices remained as low, he said.

HK Electric, which serves 570,000 users on Hong Kong and Lamma islands, will reduce average net tariffs from 134.9 cents per kilowatt hour to 133.4 cents. Managing director Wan Chi-tin said the utility had gone a further step to reduce tariffs despite pledging to freeze them for five years in 2013.

For a Kowloon resident who consumes between 400 and 800 units of electricity a month, the reductions would lower their bills by up to HK$4.4. For most residents on the island side who use 500 units a month, monthly bills could be lowered by about HK$7.5. High energy-consuming businesses will enjoy bigger rate reductions due to regressive charging rates.

Civic Party’s Kwok Ka-ki said once fuel prices went up, the companies would immediately increase the net rates. “Basic tariff rates went up for both HK Electric and CLP. Don’t play number games.”

Industrial sector lawmaker Lam Tai-fai said he was “dissapointed” that secretary could only negotiate such an “unreasonably” small reduction given the huge slide in global oil and coal prices. “Oil is at a seven year low, coal is at a nine year low. You certainly paid a lot less for fuel this year,” Lam said.

Labour’s Lee Cheuk-yan said: “It’s obvious there can be further downward adjustment because the fuel cost account has risen so sharply.” Both companies still have surpluses of some HK$2 billion each in their fuel clause accounts.

World Green Organisation chief executive Dr William Yu Yuen-ping believed the rates cuts were made to manufacture a “friendly atmosphere” ahead of the two company’s upcoming negotiations over the scheme of control regulatory framework, which expires in 2018. The scheme currently guarantees it return of 9.99 per cent on its fixed assets.

Wong said his bureau had consulted their experts and felt the tariff proposals were acceptable.

Source URL: http://www.scmp.com/news/hong-kong/economy/article/1891723/electricity-bills-hong-kong-see-1-cent-cut-lawmakers-want