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Tariff Components

The Net Tariff charged to customers is mainly made up of Basic Tariff and Fuel Clause Charge.

Basic Tariff

Basic Tariff is calculated by dividing the annual forecast total of the standard cost of fuels, operating costs and the permitted return by the forecast volume of electricity sales. It is expressed in cents per unit of electricity (1 unit of electricity = 1 kilowatt hour, kWh).

Fuel Clause Charge

Fuel cost is borne by customers as stipulated by the Scheme of Control Agreement (SCA) and has no impact on HK Electric's earnings. Standard cost of fuels is recovered from the customers by means of the Basic Tariff. A Fuel Clause Recovery Account (FCA) is established under the SCA to capture the difference between actual cost of fuels and standard cost of fuels, which is to be recovered from or returned to customers by means of Fuel Clause Charge or Rebate (FCC).

Fuel Clause Charge

Fuel Clause Charge to be adjusted Every Month

Starting from 2019, HK Electric will introduce a more frequent FCC adjustment mechanism. The adjustment of FCC will be changed from annually to monthly, which will be based on the previous three-month average actual cost of fuels. This mechanism not only timely reflects the actual cost of fuels in the tariff composition, but also smoothens out short term fluctuations in fuel prices and quantities of fuel consumption.

Under the mechanism, an FCC rate will first be determined based on the projected fuel costs for the year in the annual Tariff Review (TR) exercise. During the year, the FCC rate will be adjusted monthly according to the difference between the previous three-month average of actual Fuel Clause Chargeable (i.e. difference between actual cost of fuels and standard cost of fuels net of interest on FCA balance) per unit of electricity and that of projected in the annual TR.

How Fuel Clause Charge is Calculated?

To allow time for collection and calculation of actual fuel costs data, the January and February FCC rates are fixed at the annual FCC rate determined in TR and the adjustment of FCC rate will start from March each year.

A simple illustration of the mechanism is shown below. In February, HK Electric will collect and calculate the actual cost of fuels data for January. The FCC rate of March will therefore be adjusted by the difference between the previous three-month average fuel clause chargeable per unit of electricity (derived from two month as projected in the annual TR plus January actual) and that of projected in the annual TR. In April, the actual cost of fuels data for March or before is collected and calculated. The FCC rate of May will therefore be adjusted by the difference between the previous three-month average fuel clause chargeable per unit of electricity (derived from January, February and March actual) and that of projected in the annual TR. The same mechanism applies to the other months of the year.

Illustration of Fuel Clause Charge Calculation

To know how the FCCs in your current month electricity bill are calculated, please click here.

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