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Letters to the Editors |
Letter to the Editor of Hong Kong Economic Journal – Response to article on Scheme of Control Agreements with the power companies
In response to columnist Albert Cheng in “CLP tariff rise cannot be justified” on 20 December 2013, we would like to explain the government’s gatekeeping role under the Scheme of Control Agreements (SCAs) with the two power companies.
Electricity tariff is made up of the Basic Tariff and the Fuel Clause Charge.
The Basic Tariff rate for each company needs to be agreed to by the government under periodic review of development plans proposed by the companies. Their plans include their projections on capital expenditure, operational expenses, annual sales etc.
The government critically reviews the need, timing and budget of the proposed capital investments and accepts proposals which are absolutely necessary to ensure the public will enjoy reliable, safe and environmentally-friendly electricity supply at reasonable price. As a result, the estimated capital expenditure in the power companies’ 2014-18 development plans was cut by about 49% and 21% respectively against their original proposals.
As for the Fuel Clause Charge, as this depends on market fuel prices, we seek the support of an independent energy consultant in considering the companies’ estimate of what may be the likely fuel prices in the coming years and make an assessment of the reasonableness of such estimation.
The SCA has a mechanism via the Tariff Stabilisation Fund (TSF) to ameliorate tariff increases or stabilize tariff levels. In order to ensure the TSF can properly serve its purpose, the Government and the two power companies agreed to maintain the forecast TSF balance at a reasonable level during the discussion in the annual Tariff Review. Since 2009, the forecast TSF balances of CLP have been set at around $100 million to $300 million. The forecast balance of some $300 million by end 2014 in the current review is not a new arrangement, which is, as with the forecast for each of the following years up to 2018, far below the cap of 5% of CLP’s annual total revenues from local sales.
The above shows that the Government has been carefully monitoring the financial performance of the two power companies.
Ms Vyora Yau
Principal Assistant Secretary for the Environment (Financial Monitoring)