Date
23 July 2018
HK Electric and CLP Holdings say they are forced to raise tariffs in view of increased operating costs and higher fuel prices. Photos: HKEJ
HK Electric and CLP Holdings say they are forced to raise tariffs in view of increased operating costs and higher fuel prices. Photos: HKEJ

Power utilities to raise tariffs 1.9% next year

Hong Kong’s power utilities, CLP Holdings (00002.HK) and HK Electric Investments (02638.HK), are set to raise their tariffs by 1.9 percent from January 1.

According to announcements Tuesday, the companies are revising their charges due to increased operating costs and higher fuel prices.

CLP’s new tariff would be HK$1.154 per unit of electricity after offering special rebates, while that charged by HK Electric will be HK$1.125, also with special rebates, the Hong Kong Economic Journal reports.

The announcements were made after the Executive Council screened and approved the company proposals earlier in the day.

The markups will be the first implemented by CLP and HK Electric in two years and in four years, respectively.

According to media report, which cited a government source, HK Electric originally proposed a net tariff increase of as much as 5 percent, only to be vetoed by the Executive Council.

Meanwhile, CLP claimed that its special fuel rebate for 2016, which is HK$2.3 cents per unit of electricity, will not recur next year.

The power companies are monitored by the government under the Scheme of Control Agreement (SCA).

The new SCA agreement signed by CLP will be effective starting October next year; another tariff adjustment by then remains unknown. As for HK Electric, its new agreement will be effective until January 2019.

HK Electric chief executive Wan Chi-tin said in a Legco Q&A session on Tuesday that the company, which promised in 2013 that it would freeze its rates for five years, has no choice but to increase tariffs as fuel costs keep rising.

While he stressed the tariff charged next year will still be 16.6 percent lower than that in 2013, which shows the company has fulfilled its promise, Wan warned that HK Electric may hike its charges significantly after 2020 as it is required by the government to increase gradually the proportion of natural gas in the fuel mix for electricity generation.

The power utility is required to boost the natural gas proportion in the fuel mix to 50 percent by 2020, from 34 percent at the moment. Moreover, the price of natural gas is only expected to rise further by then.

CLP managing director Chiang Tung-keung pointed out that the main factor behind its tariff increase is the rise in fuel prices. He added that the balance of the firm’s fuel account is estimated to be about HK$2.19 billion at the end of this year and go down to HK$1.46 billion by September 2018.

Secretary for the Environment Wong Kam-sing said he believes the power utilities’ proposed less-than-2-percent tariff increase can meet citizens’ expectations. In other comments, he said he hopes the public do not see special rebates offered by them as long-term arrangements.

Wong warned of a substantial potential increase in tariffs in the future because Hong Kong is moving toward using cleaner fuel, natural gas in particular, for power generation, which will put cost pressures on the electricity firms.

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