Talks may mean lower power bills
Tuesday, November 24, 2015
Households can expect cheaper electricity if talks between the government and the power companies on reducing the amount of profit they can make are successful.
Speaking at a Legislative Council meeting yesterday, Secretary for the Environment Wong Kam-sing said the government will start negotiating with CLP Power and Hongkong Electric next year after taking advice from a consultant.
Under the current deal with the government, the two power companies are permitted to earn 9.99 percent on their net fixed assets, but the report has suggested lowering this to 6 to 8 percent.
“If the permitted rate of return is lowered, the overall tariff will have room to move downward … but in fact we also need to consider other factors. If we use more renewable energy, users may need to pay higher tariffs,” Wong said.
The government received a total of 15,762 submissions, 15,496 of which were from individuals and 266 from organizations.
Wong said almost all of the opinions agreed with the current scheme of control agreements, but there is still room for improvement in several matters, such as permitted rate of return, energy saving and tariff approval mechanism.
Most of the respondents also said the current electricity supply of Hong Kong is reliable, and the tariff is reasonable. It was unnecessary to introduce competition purely for the sake of providing more choices.
Most of the respondents who were willing to pay higher tariffs said they could afford 5-10 percent more for the cost of renewable energy.
“The public paid much concern to the permitted rate of return issue, after considering different opinions collected from different channels, including the economic environment and similar investments overseas, we consider it was necessary to further lower the permitted rate of return,” Wong said.
The current scheme of control agreements expire in 2018.
The Liberal Party’s James Tien Pei-chun suggested that even if the permitted rate of return was reduced to 6-8 percent, it would still be too high.
“On today’s standard, a 6-8 percent return rate is really good, because the interest rate is low. Even if US increases its interest rate, it should be very mild. In the coming five years, it’s impossible for the interest rate to reach 6 percent,” he said.