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Tariff Review for 2012

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Tariff Review for 2012

13 Dec 2011

HK Electric, a subsidiary of Power Assets Holdings Ltd, today presented its tariff review for 2012 to the Legislative Council including a 1 cent adjustment in basic tariff and 6.8 cent adjustment in fuel clause charge per unit of electricity. Following the adjustment, the net tariff would rise by 6.3% from 123.3 cents to 131.1 cents (see table below).

The Managing Director of HK Electric, Mr. Tso Kai-sum said in a Legco meeting that international fuel prices have remained high in recent years, driving up fuel costs for the company which uses coal and liquefied natural gas (LNG) as the main fuel sources for power generation.

As coal and LNG prices have gone up by about 20% and 47% respectively since end 2010 and the upward trend is expected to continue in 2012, the company found it would need to adjust the fuel clause charge.

"The vast majority of the 7.8 cent increase per unit of electricity for 2012 would go in meeting higher fuel prices which are subject to market fluctuation and beyond our control. Fuel costs are a pass through and do not form part of HK Electric's profit," Mr. Tso said.

To contain the impact of tariff increase, HK Electric has not been charging customers in full fuel costs over the past years. As a result, the fuel clause recovery account has accumulated a negative balance of over HK$500 million as at mid 2011 and the figure is expected to double to over HK$1 billion by the end of the year.

In addition, Mr. Tso noted that inflation had resulted in higher material and labour costs, increasing the company's operating costs and hence the decision to adjust up the basic tariff by 1 cent per unit of electricity in 2012.

"Our basic tariff has remained stable since the current Scheme of Control Agreement came into effect in January 2009. In fact, at 94.1 cents per unit of electricity, the adjusted basic tariff for 2012 is still 0.4 cents lower than the 2009 level. The increase in net tariff during the same period is wholly attributed to fuel costs," he added.

Following the latest adjustment, about 70% of HK Electric's domestic customers who use 500 units or below monthly would have their tariff increased by less than $25 a month. For 70% of non-domestic customers who use 1,700 units or below monthly, the increase would be less than $131 a month.

Mr. Tso pointed out that it would be difficult for Hong Kong to be spared of tariff increases when power operators around the world have been impacted by rising fuel prices. Electricity tariffs are relatively low in Hong Kong when compared with many other international cities, accounting for less than 2% of monthly household expenditure.

To cater for those in need, HK Electric has in place a Concessionary Tariff Scheme which offers 60% discount on tariffs for the first 200 units of electricity for eligible applicants, including the elderly, disabled, unemployed and single-parent families under the Comprehensive Social Service Assistance. These customers will also have their deposit and minimum charge payments waived.

Tariff Review for 2012

Components (Cents/ kWh)

2011

2012

Changes

Basic Tariff

93.1

94.1

1.0

Fuel Clause Charge

30.2

37.0

6.8

Net Tariff

123.3

131.1

7.8

(+6.3%)