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Shock as power pair slammed

Hilary Wong

December 05, 2014

CLP Power and Hongkong Electric have been operating like a duopoly for years, unfairly overburdening consumers with price rises while being allowed to earn risk-free profits, the Consumer Council said.

The consumer watchdog said the existing method of regulation through the Scheme of Control Agreements, which expire in 2018, needs to be reformed.

It also proposed an energy commission that may meet the future challenge of a reform policy.

In its 170-page report released yesterday, the council said the existing regulations will not be flexible enough to adapt to the new environmental policy supporting emission reduction over the next 30 years.

Chief trade practices officer Victor Hung Tin-yau said under the current scheme, “the two power companies are allowed to earn a high risk-free profit while passing on business risks to consumers to an undue degree.” The scheme has “low transparency and lack the engagement of consumers.”

Competition policy committee head Thomas Cheng Kin-hon said reform should take place “incrementally” to ensure the merits of the existing system and meet new objectives.

The study was undertaken with the advice of an expert international group formed to look into the experience of electricity regulatory reform in the mainland, Britain, Australia, Germany and France.

Cheng said liberalizing the retail electricity market “presents no sound solution” since overseas experience has found that it spurs residential users to face higher bills and commercial users to pay less than before.

The report also suggests using diversified energy resources such as power station fuel, natural gas, renewables, nuclear and biomass, which can reduce emissions of greenhouse gas.

As to the cost-effectiveness of having renewables, one of the experts, Stephen Thomas a professor of energy policy and director of research in the Business School of the University of Greenwich in London said it depends on local resources.

“For example, Britain is windy, so wind power is more cost effective. Similarly since Britain is not a sunny country, solar power will be more expensive, so it has to look at the local condition and local resources,” he said. “Hong Kong has its own resources some are good and some are not so good.”

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