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Two million consumers to pay more, but Hongkong Electric tariff frozen

CLP Power (SEHK: 0002) was yesterday given government approval to raise its tariff by 2.6 per cent next year, including the basic tariff, which was adjusted for the first time in 10 years.

But Hongkong Electric (SEHK: 0006)’s charges for next year will be frozen.

The approved increase for more than two million power users in Kowloon and the New Territories triggered fears that it would push up inflation, and raise more questions on the future cost of clean energy.

From January 1 CLP Power’s charge per kilowatt hour will be 91.5 HK cents – 2.3 cents, or 2.6 per cent, higher than the existing 89.2 cents.

The increase includes a 2.6 cent rise in the basic tariff, which is partly offset by a fall in the fuel charge of 0.3 cents made possible by stable prices over the past year.

It means more than 70 per cent of domestic and commercial users will see monthly increases of less than HK$10 and HK$40, respectively.

CLP Power attributed the basic tariff increase to a rise in capital investment on emissions controls, and provision of a replacement gas supply, along with a rise in the cost of raw materials such as copper and aluminium.

“We are seeing in 2010 a slightly higher level of capital expenditure compounded by higher material costs,” Richard Lancaster, CLP Power’s chief operating officer, told the economic development panel yesterday. Lancaster said emissions control projects must be carried out to meet licence requirements, and new gas supplies had to be made ready by 2012 before the existing source from Hainan ran out.

The company is working on a desulphurisation project, and planning new pipelines from Shenzhen to receive natural gas from Central Asia and a LNG terminal.

The company also has to provide about HK$5 billion for power supply infrastructure at new developments such as in Kai Tak. Lancaster said it was the first time in 10 years that the firm had raised its basic tariff, and the new net tariff would still be lower than last year’s level.

Environment secretary Edward Yau Tang-wah said yesterday that while anti-pollution measures at power plants were necessary, they were not the only reasons behind the tariff rise.

He said emissions control accounted for less than a third of the total capital spending of CLP Power, with about a half being spent on power transmission and distribution to new developments.

Hongkong Electric will freeze its tariff at 119.9 cents per kilowatt hour, without changes to either the basic rate or fuel charge.

“We hope this will help the economic recovery of Hong Kong, and minimise the impact on the public,” Tso Kai-sum, its group managing director, said.

However, Tso warned that the company was still under pressure to increase charges, because it had to double its gas use for power generation to 600,000 tonnes next year, and gas was about three times dearer than coal.

A person familiar with the negotiations between the government and the power firms said both companies had originally proposed raising their tariffs by 3-5 per cent. The person said Hongkong Electric would have a greater deficit in its fuel account next year as it expanded its gas intake.

Concerns have been expressed over the cost of increasing gas-fired electricity generation to a half in Hong Kong to improve air quality or mitigate climate change. Hongkong Electric said it needed to build more gas-fired units for this, while CLP Power said that its newly sourced gas supply from the mainland would be more expensive than what it was currently paying.

Meanwhile, legislator Lee Cheuk-yan criticised CLP Power for ignoring the financial difficulties low-income groups faced.

“This is likely to trigger a chain of price increases and the poor, who have not had any pay rises in recent years, are the hardest hit,” the unionist said.

Miriam Lau Kin-yee of the Liberal Party queried if it was justifiable for power firms to pass on all capital spending to consumers.

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