CLP Power Ltd, the power supplier for Kowloon and New Territories, will reduce its average basic tariff by 10 percent starting next month. But after taking into account fuel-cost adjustments, the net decrease is only 3 percent.

For example, a household that pays HK$300 per month will enjoy a rebate of HK$9.

The power company said that owing to surging fuel prices, the tariff reduction margin can be no more than 3 percent in order to offset their increased operating costs. On the other hand, some academics and lawmakers are not happy with the margin decrease.

The Executive Council yesterday approved the company's five-year development plan through December 2013. According to the plan, the company agrees to cut the basic tariff by 10 percent following protracted negotiations in the course of a new scheme-of-control agreement inked in January this year. But after taking into account coal-price fluctuations, the net tariff decrease that customers will enjoy is merely 3 percent.

Speaking to the media, Secretary for the Environment Edward Yau attributed the tariff decrease to three major reasons.

Firstly, the permitted rate of return by the company is reduced from 13.5-15 percent to 9.99 percent under the new scheme of control that will become effective next month.

Secondly, capital expenditure is reduced from HK$56.6 billion to HK$39.9 billion because the proposed natural-liquefied-gas receiving terminal at South Soko Island has been shelved.

Thirdly, the government has persuaded the company to drastically scale back the price-stabilization fund balance by more than 90 percent from HK$2.1 billion to a new low of around HK$150 million.

Informed sources said the government has been keeping the gate very well and the reduction margin is reasonable. They expect the basic tariff to remain more or less the same until June 2009.

However, the government cannot assure fluctuations of coal fuel prices, which had risen by 70 percent over January this year when the new scheme-of-control agreement was signed.

Separately, CLP Power Planning Director Chan Shiu-hung said the 3 percent net tariff decrease is calculated after taking into account the fuel-cost increases.

He explained: "As Hong Kong is a city that totally relies on coal imports, the electricity tariff is subject to the variations in coal prices. If they fail to go down, we may need to revise the fuel-cost charges."

Lam Pun-lee, associate professor of finance at the Polytechnic University, expected the public to be very disappointed to hear the reduction margin.

During the negotiation of the scheme-of-control agreement, people expected a tariff decrease of 10-15 percent, but now the reduction is just 10 percent and the net decrease is merely 3 percent, he noted.

The Legislative Council's Economic Services Panel member Fred Li also said he was disappointed in such a low net reduction margin.

(HK Edition 09/24/2008 page1)