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Give us a clearer picture, Hong Kong lawmakers urge officials on electricity market study findings

Results described as failing to show a diversity of opinions

Lawmakers are demanding a more precise breakdown of the results of a public consultation on the development of the electricity market as nearly a third of submissions were templates and the rest a mystery.

They said the results of the government’s consultation were simplistic and failed to show a diversity of opinions.

“The results of this consultation, I think, is too simple,” said tourism sector lawmaker Yiu Si-wing at a meeting of the Legislative Council’s economic development panel on Monday.

“There are 5,000 templates but we don’t have any breakdown of these other figures. We need to know people’s views and what most of the public is concerned about. Some may have put forward very unique and professional views … such as on renewable energy.”

Panel chairman James Tien Pei-chun agreed, and asked the bureau to provide more detailed analysis. “We want to know the justifications. There are over 10,000 submissions so there must very different views,” he said.

Deputy secretary for the environment Vincent Liu Ming-kwong said his office would consider if more detailed information could be provided to members.

The findings of the government’s consultation, which drew 15,765 submissions, saw no need to break the monopolies held by the city’s two power suppliers, nor cut the profits they could make.

More than half of respondents favoured keeping return rates at 9.99 per cent to give power companies an incentive to invest.

A third of submissions to the consultation, which ended in June, came at the behest of green groups, which favoured lower fees and more competition. The source of the rest remained a mystery.

Others favoured lower returns but “a relatively small number of respondents” suggested a rate below 6 per cent”. Earlier this year, the government had proposed lowering the rate of return from the 9.99 per cent down to 6 to 8 per cent.

Some lawmakers, including those from the business sector, had reservations on whether the level was appropriate without stricter conditions imposed on the suppliers for more renewable energy generation and the interconnection of their power grids. They also were sceptical about renewing the framework for another 10 or 15 years.

Labour’s Lee Cheuk-yan said the government claimed large-scale renewable energy was not feasible locally but that technology was improving. “If we sign for another 10 years and your grid isn’t opened, no one will be able to tap into it,” he said.

Tien, from the pro-business Liberal Party, said even 6 to 8 per cent was “a bit high” given the economic and low-interest rate environment. “When I joined Legco in 1988, the permitted rate of return was 15 per cent, but no one thought it was high because borrowing costs and inflation were both more than 10 per cent,” he said.

“The yield on 30-year US treasury bonds is now at 3 per cent … so the 6 to 8 per cent really amounts to big earnings for them in this environment.”

He also pointed out that there was no need for such a high guaranteed return or lengthy contract – both CLP Power and HK Electric are eyeing another 15 years – as the two suppliers had already made most of the long-term investments they needed over the last few decades.

In response, Liu said many coal-fired plants would soon have to be retired and replaced, while natural gas generation would involve high costs. “Many new investments are needed,” he said.

Environment chief Wong Kam-sing said while public opinion was clear, its consultant would examine the rate of return and the government would begin official negotiations with the two suppliers next year with the aim of setting a final rate in the next one or two.

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