Hong Kong’s power firms urged to share risks of global fuel price increases as they defend delay in cutting tariffs
- CLP Power and HK Electric say electricity tariffs lagged behind real-time fuel prices because of way they pegged their natural gas contracts
- Electricity tariffs are expected to fall in the middle of the year
Hong Kong’s environmental authorities have sought to engage the city’s two power utilities to share the risks of international fuel price increases, as the firms defended the delay in cutting tariffs despite the recent falling costs.
CLP Power and HK Electric sparked public alarm last November when they announced increases in their electricity prices by 19.8 per cent and 45.6 per cent respectively by January year-on-year, as fuel costs soared amid the Ukraine war.
HK Electric on Monday announced it would raise its fuel adjustment surcharge to 90.6 HK cents (0.1 US cents) per kWh in April, up from 86.4 HK cents this month.
The increase will push the overall rate for residents living on Hong Kong Island, Ap Lei Chau and Lamma Island to 205.1 HK cents per kWh, an increase of 36.6 per cent year-on-year.
Meanwhile, CLP Power, which serves Kowloon, the New Territories and most of the city’s outlying islands, will freeze its tariff at 155.2 HK cents per kWh as part of a rebate scheme that will run from April until June.
In an environmental affairs panel meeting at the Legislative Council, lawmakers questioned why the two power firms’ rates did not correspond to the softening of international gas prices and instead kept rising over the past months.
The Henry Hub natural gas spot price closed at US$2.22 per unit last Friday, down from the historic high of US$9.68 on August 22 last year.
Brent crude oil last Friday was trading at US$74.99 per barrel, down from US$120.30 last June 8.
Forty-eight per cent of the city’s electric power comes from natural gas and 24 per cent from coal, with the remainder from nuclear energy and renewables.
CLP Power’s managing director Chiang Tung-keung explained that the prices of its natural gas contracts were pegged to averages of oil prices ranging various months instead of natural gas spot prices, leading to a lag that could last “a good few months”.
“Different supply contracts use different oil price pegging mechanisms. Some contracts reference a three-month average of oil prices, but one uses a nine-month average,” he told lawmakers.
HK Electric’s general manager Bill Ho Yin-piu noted that under the current pricing practice, there was a delay of between six and eight months.
Secretary for Environment and Ecology Tse Chin-wan said in the same panel meeting that the government had already asked the two power companies to reduce their fuel surcharges to help lessen the public’s financial burden.
“We’ve seen problems happen, albeit rarely. But it was still unprecedented for Hong Kong,” he said. “We intend to discuss with both power utilities whether we can have a mechanism to share the risk [of international price hikes] if we rencounter this situation.”
However, he noted that the mechanism would only materialise when the two energy companies reached an agreement with authorities.
Meanwhile, other lawmakers urged the government to purchase electricity from mainland China to lower electricity prices.
