The Legislative Council Panel on Economic Development voted to oppose proposed tariff increases for consumers on Friday.

The non-binding motions urged the SAR's two power companies to defer their plans for two months. Another motion that sought to obtain documents in relation to the tariff negotiation was vetoed.

The government will continue discussions with the companies about the tariff increases over the next few days. At the same time it will re-assert its view that there is room for further reduction of the tariff proposals.

On December 13, Hongkong Electric Ltd and CLP announced power-rate increases higher than the rate of inflation. Hongkong Electric said it would raise rates by 6.3 percent. CLP presented a 9.2 percent increase, effective January 1, 2012. The size of the increases sparked widespread dissatisfaction in the territory. Bowing to public pressure, CLP on Wednesday lowered its planned increase to 7.4 percent by deducting the increase for fuel cost. But it did not adjust the basic tariff. The announcement was criticized as trickery, since the fuel cost was only accrued but not waived.

At the panel meeting on Friday, Secretary for Environment Edward Yau said the government was not content with justifications offered by the companies for such large increases.

Particularly, he noted, the operating cost submitted by CLP for 2012 is 11.2 percent higher than the previous year. The government also found the company's capital investment excessive and premature.

Yau also urged the companies to use the tariff stabilization fund and fuel charge account as a buffer, as well as to repay customers money that was returned after the government overcharged the companies on property rents. "If the above measures are fully performed, the increase margin for next year will not be so huge," he told the meeting.

Lau Kong-wah of the Democratic Alliance for the Betterment and Progress of Hong Kong and The Democratic Party's Fred Li asked to what extent the electricity tariffs could be deducted if all the measures were carried out.

The Civic Party's Alan Leong also asked whether the Executive Council's approval would be needed if the increase margins do not exceed 9.99 percent as permitted by the Scheme of Control.

Yau was unable to predict the extent of a tariff reduction, saying it is the power companies which supply electricity, not the government.

Questioned by lawmakers, CLP Managing Director Richard Lancaster said the company has not made any premature capital investment without the government's approval. Regarding the spike in operating expenditure for 2012, he said that the increase included new emission control facilities to meet the government's new emission caps.

CLP undertook at the previous meeting that it would repay customers with the full amount of the government rents and rates refund. Hongkong Electric did not give a clear reply to the same question on Friday. The company said it is still negotiating with the government about the sum.

Lancaster said CLP has responded positively to the government concerning the fuel charge and government rents and rates. CLP will respond to the remaining issues early next week. But he doesn't expect any delay of the tariff increase.

joseph@chinadailyhk.com

China Daily

(HK Edition 12/24/2011 page1)