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Pull plug on power duopoly, Tang says

South China Morning Post –

Clear the Air says:

Tang was extremely silent (without a speech writer) whilst being number 2 in the Administration in his last day job.

Now he wants the number one job he is more vocal which suggests he was incompetent in his former job or basically had no say, so why would the public now believe his intentions ?

The Government negotiated and agreed  binding contracts with the power companies under the Scheme of Control. The Government of which Tang was number 2, was at fault.

The contract was excessive and flawed and too beneficial to the power companies under its ‘build more, get more return’ policy.

The contracts were, however and remain, legal binding documents between the Government and the two suppliers.

It is puerile of Government  to whine when the suppliers seek to obtain what they are entitled to.

In the private business world, the person or team approving and signing such a lopsided contract would have been long since fired.

Demands for opening up of market supported by chief executive candidate, who points to success of telecom break-up as outcry over price rises grows

Peter So and Cheung Chi-fai 
Dec 23, 2011

Chief executive candidate Henry Tang Ying-yen added his voice yesterday to the public clamour against electricity price rises, calling for the power duopoly to be opened to competition.

“In the long run, Hong Kong should introduce competition [into the market],” Tang said during a radio interview.

“We could consider breaking the power supply into two different markets, for generation and distribution. On this, we have the example of the opening up of the telecom market.”

Asked again about the electricity tariff rises at a public forum organised by the Liberal Party, Tang said: “It is the responsibility of the next administration to come up with a better agreement [with power companies] so that the tariff can be more reasonable.”

The government opened up the telecommunications market in 1995 and paid Hong Kong Telecom HK$6.7 billion to terminate its exclusive licence in 1998, eight years earlier than scheduled. That change allowed more operators to enter the market through the third-party access rights to the telecom giant’s exchanges, causing the cost of international calls to plummet.

But whether breaking up the power monopoly, controlled by Hongkong Electric (SEHK: 0006) and CLP Power (SEHK: 0002), would go as smoothly seems unlikely, as studies have concluded.

The two utilities control the supply, distribution and services, leaving no niches for newcomers to the business. If they are paid compensation, the Hong Kong taxpayer would have to pick up the tab. Questions have been raised about how to regulate a power supplier operating from the mainland and whether, and how much, the power grid owner should be paid in compensation.

There was a failed attempt in 2008 when China Power International (SEHK: 2380) vowed to break the duopoly and to supply power to border areas; it dropped its plan because the government did not want to duplicate the supply network.

Officials will have to confront the issue as they have pledged to notify the power firms by the end of 2015 if they decide the market is ready for opening up after 2018, when the existing regulatory regime expires.

Then both sides must discuss the financial arrangements relating to assets and investment left redundant by opening up the market. Issues related to the future regulatory framework must also be decided.

Tang’s rival Leung Chung-ying said further study was needed.

“The most important [thing] is that the operator will have a reasonable return, and offer quality services at prices affordable to the public and businesses,” he said yesterday after the same forum.

A spokesman for the Environment Bureau yesterday said it was studying issues involved in reforming the market. The government has reportedly already appointed a consultant to study a range of issues, including how to introduce competition in the local market.

Dr William Yu Yuen-ping, the head of WWF Hong Kong’s climate programme, said the city could start tackling the issue by strengthening the interconnections between the two firms to minimise their reserve generating capacity, which was excessive.

Dr Billy Mak Shui-choi, of Baptist University’s department of finance, said any opening up should be cost-effective and not sacrifice the reliability of supply. He urged officials to learn the lessons of the power markets on the mainland and California, where either excessive regulation or fully liberalised markets have been cited as a cause of blackouts.

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