Jun 14, 2012
We hear that following the row over higher electricity tariffs earlier this year, CLP has put more or less on “permanent hold” the work on converting its Castle Peak ‘A’ power plant from coal-fired to the cleaner gas-fired boilers. It will now continue to run on coal with just one experimental agglomerator, which removes particle matter, but no scrubbers, which take out sulphur.
The government is pressing the power companies to meet emission standards but it would appear that it only wants them to “meet” these standards rather than to better them by a wide margin. That is, the Environment Bureau doesn’t want them to improve their emissions too much, because the resulting capital expenditure would result in a rise in tariffs.
The scheme of control, which is negotiated with the government, allows companies an agreed rate of return from its depreciated net assets. At the same time, the government urges the power companies to reduce emissions, but it doesn’t have the guts to tell the public that this will cost more. Instead, it publicly blames the power companies when they try to raise tariffs.
CLP had wanted to raise tariffs by 9.2 per cent but after the government-inspired row, ended up with a 4.9 per cent increase. The direct effect of this is lower air quality in an arrangement agreed by the bureau.
At the same time, CLP has been forced by the Hong Kong government to buy its gas from the mainland at prices that will have to be negotiated with supplier CNOOC (SEHK: 0883). But since CLP has been cut off from global markets, it’s not hard to see who will have the advantage in those discussions.
The Environment Bureau, led by Edward Yau Tang-wah, plays a highly duplicitous role in the politics of Hong Kong air quality. On the one hand it claims that it can’t do much about Hong Kong’s dirty air and says much of the pollution comes from the Pearl River Delta; on the other it ignores effective measures that could be taken to get old buses and trucks off the road.
When CLP wants to convert to environmentally cleaner gas, the government and the bureau show they have no stomach for a fight with the public and agree to lower standards