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CLP chief urges ‘transparent’ energy policy


Power firm wants government to admit to public that rise in energy bills is down to its requirement that generators cut their carbon emissions

Denise Tsang
May 15, 2012

CLP’s group chief executive, Andrew Brandler, has called on the incoming administration of Leung Chun-ying to be more transparent over energy policy than its predecessor has been.

Brandler’s comments come as the 80 per cent of the city’s population who depend on CLP for electricity brace for a sharp rise in their energy bills starting from next year.

The expected rate increase stems from a deal CLP has struck through Capco, a joint venture of its subsidiary CLP Power (SEHK: 0002), with the National Development and Reform Commission and the state-owned fuel suppliers PetroChina (SEHK: 0857announcements,news) and CNOOC (SEHK: 0883).

Brandler disclosed in an exclusive interview with the South China Morning Post (SEHK:0583announcementsnews) yesterday that the terms of the gas supply contract were agreed six months ago. But he said Chief Executive Donald Tsang Yam-kuen’s administration had yet to approve the deal. The slowness of the approval process angered CLP’s chairman, Michael Kadoorie, who attacked the government last week for its inefficiency but did not then disclose the delay in approving the contract. It was Tsang who agreed to the contract with Beijing in 2008.

The new contract provides for the purchase of clean fuel in the form of gas to generate electricity over the next 20 years from 2013. PetroChina will import gas from Turkmenistan to the mainland and funnel it through a submarine pipeline to the Black Point power station.

The new contract price, about three times more expensive than the existing gas contract price set 20 years ago, will lift fuel costs by 40 per cent.

The existing contract, which expires soon as a result of the depletion of the gas reserve in theYacheng field off Hainan Island, charges US$6 per unit, according to a source. That is roughly one third of what other places, such as Japan, pay.

“It is a reasonable price linked to [current] market levels,” Brandler said. “People are angry at CLP and said it’s ripping off customers, but we are not going to make any profit out of it.”

Regulations say the city’s two power producers, CLP and Hongkong Electric (SEHK: 0006), must pass fuel costs on to their customers.

Brandler blamed the Hong Kong government for failing to explain to the public the consequences of its energy policy, which requires CLP and Hongkong Electric to lower carbon emissions by up to 64 per cent by 2015 from 2010 levels. That means CLP needs to double its gas consumption.

“We want more transparency from the new administration,” Brandler said. “The government needs to explain to people about the impact of the energy policy on tariffs.”

The Environment Bureau said CLP had been involved in commercial negotiations with its mainland counterparts on the provision of natural gas. It said the bureau would monitor the developments to ensure the arrangements would be in line with its energy policy objectives.

CLP raised tariffs by 4.9 per cent in January instead of an originally proposed 9.2 per cent, after pressure from the government and the public.

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