22 October 2016
As our city is at a crossroads regarding the way forward for our electricity market, it is important for the administration to provide the public with a two-sided argument on this critical issue. Photo: HKEJ
As our city is at a crossroads regarding the way forward for our electricity market, it is important for the administration to provide the public with a two-sided argument on this critical issue. Photo: HKEJ

Is opening up our electricity market necessarily a good thing?

Over the past two years, the SAR government has launched two rounds of public consultation on the future of our electricity market.

In last year’s consultation, the administration received over 86,000 public submissions, most of which were against the proposal of importing electricity from nearby Guangdong province.

The second round of consultation took place between March and June this year, during which it is said that the Environment Bureau received around 10,400 submissions, but the results of the consultation have yet to be released.

As there have been calls for greater accountability in government, I urge the administration to publish the consultation results as soon as possible, in order to facilitate public discussion and allow sufficient time for our society to reach a consensus on this important issue.

Based on the discussion, the government can then formulate its policy on electricity market regulation beyond 2018.

In September this year, the Consumer Council and the Competition Commission jointly organized a public forum on opening up our electricity market.

Guest speakers were overwhelmingly in favor of the idea and put a lot of emphasis on the benefits of introducing more competition to our energy market.

However, they were only able to cite Singapore as an example of a successful implementation of such a policy.

They said tariff has generally come down after Singapore partially opened up its electricity market, with the number of suppliers doubling from three to six, and 84 percent of the country’s power supply subject to competition.

However, it is not difficult for one to notice considerable discrepancies between what the speakers said at the forum and what the government said in its consultation document.

The third chapter of the document, titled “Overseas experience in opening up the energy market”, expresses reservations about the idea, saying there could be a trade-off between the quality of service and the increase in the number of consumer choices once our energy market is opened up to more competitors, and more competition might not necessarily guarantee a cheap and stable electricity supply for local households in the long run.

Over the past 20 years I have attended more than a hundred public forums on the electricity market in Britain, the United States, Japan, South Korea, New Zealand, France, Belgium and mainland China, and I have never seen one in which speakers almost unanimously offered a one-sided argument in favor of a particular option like the one held by the Consumer Council and the Competition Commission last month.

While those who attended that forum could have been dazzled by all the benefits of opening up our energy market presented by the various speakers, what they didn’t tell us is the failed experience of some overseas regions in this regard.

For example, back in the ’90s, California learned the devastating lesson of how opening up the electricity market in haste could produce profound negative impact on society and the economy, and given its painful lesson, many states in the US simply called a halt to their energy market restructuring and switched back to private monopolies.

Today there are more states in the US that retain the system of private monopolies in their electricity markets than those adopting a free competition approach.

In New Zealand, electricity prices only went down briefly after the government opened up its energy market, and then started to shoot up again in a few years’ time.

Today many New Zealand families have to pay for an even more expensive electricity bill while getting a much worse service.

And the UK, once the world’s pioneer in developing the wholesale electricity market, is also having second thoughts about the idea after the country suffered nationwide blackouts which led to heavy economic losses.

Perhaps it might take at least five to seven years before we can tell whether Singapore’s decision to open up its energy market will eventually pay off.

This article appeared in the Hong Kong Economic Journal on Oct. 27.

Translation by Alan Lee

[Chinese version中文版]

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