CLP Power said on Wednesday that it is negotiating with the government about an electricity rates hike in 2012.

The power supplier's remarks confirmed recent media reports that it is seeking a higher-than-inflation-rate tariff increase.

It cited rising fuel costs as the major cause.

It was unwilling to disclose figures, on the grounds that the company and Hong Kong Electric are negotiating with the government over electricity tariffs.

Media reported recently that the two major power suppliers in the city want to raise tariffs above the level of inflation rate next year, with a margin as high as 10 percent.

Negotiations are in progress. The government will report the outcome to the Legislative Council Panel on Economic Development on Dec 13.

Panel member Albert Chan said the government should strive to talk down the proposed increases as far as possible, to ease the burden on consumers.

He conjectured that it was the government that was testing public sentiment by leaking the companies' applications to the news media, in order to bring public pressure to bear on the power companies.

Lawmaker Wong Kwok-hing, of the Hong Kong Federation of Trade Unions, said he would even find it difficult to accept a minor adjustment of 1-2 percent, yet any increase close to the inflation rate, or higher, is unacceptable in the current economic condition.

Speaking after attending a public gathering on Wednesday, Richard Lancaster, managing director of CLP Power, said there will be a significant increase in electricity tariffs in 2012.

He declined to talk discuss the rate of increase, citing ongoing negotiations.

"We are at a turning point of electricity supply that we need to comply with the government's air quality objectives; we have to use more natural gas (for electricity production) but the prices of natural gas are more expensive," he said.

"At the same time, electricity tariffs are rising significantly all over the world and Hong Kong cannot stay away from that pressure."

He highlighted the greater use of greener fuels such as natural gas while the burning of coal for power production has declined, to meet the emission caps by 2010.

A tightened target calling for further reduction of emissions by 40-50 percent by 2015, requiring natural gas, will be enforced, he said. He noted however that the prices of natural gas have increased nearly three times the contracted price of 20 years ago, under which CLP obtained its supplies.

joseph@chinadailyhk.com

China Daily

(HK Edition 12/01/2011 page1)