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CHAIRMAN’S STATEMENT
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| HK ELECTRIC INVESTMENTS
POWER SECTOR NEEDS A STABLE AND
BALANCED REGULATORY REGIME
Hong Kong’s electricity companies operate on the basis of a
Scheme of Control Agreement (SCA) with the government,
which sets out their returns and performance obligations.
The current SCA will expire in 2018 with an option for the
government to extend it by five years. During the year the
government conducted a public consultation on the future
development of the electricity market in Hong Kong, seeking
the community’s views on a number of strategic topics
including regulatory arrangements going forward and the
introduction of more competition to the market.
Following extensive consultation with our stakeholders
we have submitted to the government that the proposals
contained in the consultation paper will only bring about
uncertainties, and not benefits. We are encouraged that
the majority of the respondents to the consultation exercise
share our views on all key facets of the consultation.
Hong Kong is a highly compact vertical city and an
unfailing supply of electricity is fundamental to the lives and
businesses of those who work here. In fact, it underpins
Hong Kong’s very position as a global financial and trade
hub. The prevailing SCA is cost-effective and provides
stability, allowing industry players to operate effectively.
Almost all respondents to the exercise concurred with
us that the current arrangement had generally worked
well and allowed the government to achieve its energy
policy objectives of safety, reliability, affordability and
environmental protection.
The rate of return permitted under the current SCA has
proven effective in balancing the interests of consumers
and industry players, creating a stable environment where
the long-term investments necessary for Hong Kong’s
electricity infrastructure can be made. More than half of the
submissions from the public supported the maintenance of
the rate of return at the current level of 9.99% to provide
the necessary incentives for power companies to make
investments.
The majority of the respondents also agreed with our view
that the duration of the SCA should be maintained at ten
years, with an option exercisable by the government to
extend for five more years.
Experiences in overseas markets have proved that
deregulation processes are laborious and protracted.
Competition may not deliver tariff reduction, and choice may
not guarantee customer satisfaction. The majority of the
respondents considered that the power supply in Hong Kong
was reliable and safe at an affordable price. They did not see
a need to introduce competition for the sake of bringing in
choice.
It is our belief and conviction that the current Scheme of
Control regime, with its clear and proven track record, is the
best way forward for Hong Kong.
FURTHER STEPS TOWARDS REDUCING
EMISSIONS
As a power company we recognise that our operations
affect Hong Kong’s environment as a whole and we run a
multi-pronged emissions reduction programme to minimise
our impact. As a result we have consistently outperformed
statutory targets, reducing emissions of sulphur dioxide,
nitrogen oxides and respirable suspended particulates by
40% to 90% since 2008.
We strive to constantly improve our emissions performance
to leave a clean Hong Kong for the generations to come.
In this context we agreed to more stringent environmental
targets as contained in the government’s relevant Technical
Memorandum No. 5, which will come into force from 2020
onwards.
Our primary strategy to achieve these targets is to increase
the proportion of electricity we generate from natural gas.
Following formal approval by the government, we are
moving full steam ahead with the development of a new
gas-fired generating unit (L10) at Lamma Power Station.
The project is part of our Five-year Development Plan
(2014-2018). Among other things, it will enable us to
increase the proportion of gas-fired generation to about
50% while maintaining reliability. The L10 unit will play
an important role in reducing emissions and our carbon
footprint when it is commissioned in 2020.
We have strengthened our support for electric vehicles (EVs)
in order to aid the community’s efforts to reduce roadside
emissions. A special advisory service has been launched to
facilitate the setting up of EV charging facilities at private
buildings.