Date
24 November 2017
Hong Kong's permitted return for power utilities doesn't match international norms in real terms, says Wan Chi-tin of HK Electric. Photo: HKEJ
Hong Kong's permitted return for power utilities doesn't match international norms in real terms, says Wan Chi-tin of HK Electric. Photo: HKEJ

HK Electric looks foward to review on permitted rate of return

The Hongkong Electric Co. hopes to have its Scheme of Control Agreement (SCA) placed under review as the government has completed a consultation on the city’s optimal fuel mix for power generation and is seeking to open up the market.

Many overseas regulators fix the permitted profit levels for utilities firms on top of inflation, but that has been lacking in Hong Kong, said Wan Chi-tin, managing director of Power Assets Holdings (00006.HK), the parent of Hongkong Electric.

Under the current SCA between HK Electric and the government, the company is allowed to have an annual yield of 9.99 percent.

The figure is in line with the international level nominally, but not in real terms, according to Wan.

The issue will be discussed with the government after a new regulatory framework is in place. 

The Hong Kong government will soon start soliciting opinions regarding the opening up of the local power market, while unveiling the consultation results on possible changes in the city’s fuel mix for electricity generation.

Wan said the topmost priority should be safety, reliability and efficiency, while tariff levels and environmental protection standards are also critical.

The company will collaborate with the government on the review regarding permitted rate of return and other reforms in the market, he added.

This article appeared in the Hong Kong Economic Journal on March 19. 

Translation by Vey Wong

[Chinese version 中文版]

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