The Government today (March 31) launched the three-month Public Consultation on the Future Development of the Electricity Market.
"The current Scheme of Control Agreements (SCAs) between the Government and the two power companies will expire in 2018 and we need to consider how to further develop our electricity market having regard to our four energy policy objectives of safety, reliability, affordability and environmental protection, as well as our goal to introduce competition when the requisite market conditions are present," the Secretary for the Environment, Mr Wong Kam-sing, said when launching the public consultation.
Building on various reviews and public consultations relating to electricity supply conducted over the past few years, in particular the one on the future fuel mix for electricity generation, the Government has conducted a review of the future development of the electricity market taking into account the views and suggestions received. "In particular, we note that the public attaches much importance to ensuring a high level of reliability of electricity supply and have reservations on importing electricity from the Mainland at this stage," Mr Wong added.
The Government has studied the experiences of a number of overseas regimes and found that market liberalisation in these places delivered mixed outcomes. While it should not be expected that introducing competition to the market would naturally lead to tariff reduction, it would allow consumers to have more choices. Keeping competition as the goal, the review has examined the readiness of introducing competition after the expiry of the current SCAs.
"It is unlikely that we would have any new suppliers of sizeable scale either from the Mainland or locally in the near term. However, to pave the way for Hong Kong to introduce competition in the longer term, we plan to conduct the necessary preparatory work, which includes conducting a joint study with the power companies on grid access arrangements by new players, and a study on the detailed arrangements required to enhance the interconnection with the Mainland grid and between the local power grids such that new suppliers, when available, may participate in the electricity supply market," Mr Wong said.
Another key focus of the review is the future regulatory arrangement. "We consider that the present contractual arrangement has largely been serving Hong Kong well. However, there are some areas for review including the permitted rate of return, the tariff approval process, promotion of information transparency, the incentive and penalty scheme to enhance power companies' performance, measures to promote energy saving and renewable energy, etc. We have set out some suggestions to solicit further views from the public," Mr Wong said.
On the future fuel mix for electricity generation, some 86 000 submissions were received during the fuel mix consultation in 2014. In regard to the two fuel mix options, the majority of the respondents preferred local generation. Having considered the public's views, the Government plans to increase the percentage of natural gas generation to around 50 per cent in 2020, and maintain the current interim measure of importing 80 per cent of nuclear output from the Daya Bay Nuclear Power Station so that nuclear import would account for around 25 per cent of the total fuel mix. Subject to public views on the tariff implications, the Government is prepared to develop more renewable energy, and will also enhance efforts to promote energy saving. The remaining demand will be met by coal-fired generation. This will help Hong Kong achieve the environmental targets for 2020.
Electricity is closely linked to daily lives and economic development in Hong Kong. "We have an open mind on the future development of the electricity market and welcome views from the public," Mr Wong said.
The consultation will close on June 30, 2015. The consultation document can be downloaded from the website of the Environment Bureau (www.enb.gov.hk). Members of the public can send their views in writing by mail, fax or email to the Environment Bureau.
Ends/Tuesday, March 31, 2015
Issued at HKT 16:54