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On the front cover of the Hongkong Electric Company’s 2003 annual report is a short eye-catching phrase: “Always on for Hong Kong”. A vow of future commitment or a boast about past achievements, the phrase clearly refers to the “exceptional”, “around the clock”1 reliability in the services the Company provides to its customers. While such reliability frees millions of Hong Kong businesses and residents from annoying power disruptions, it comes at a price - one that many deem unfair. In fact, there have been increasing calls for a reduction in electricity tariffs and acute scrutiny of the Scheme of Control (SOC) Agreements, the framework that regulates Hong Kong’s power industry. In November 2002, Electric Consumer Concern, an alliance of seven major property developers that collectively account for more than 20% of the demand for power in Hong Kong, made an unprecedented public appeal for a power rate cut. The head of corporate communications at Sun Hung Kai Properties, Ms May Lau, told the public:2

“We are concerned about high electricity charges in Hong Kong. They place an added burden on individuals as well as businesses and hurt the territory’s overall competitiveness.”

A few days later, an overwhelming majority in the Legislative Council passed a motion to pursue a reduction or concession on electricity charges. Standing in front of the Legislative Council, the Secretary for Economic Development and Manpower appealed to the power companies to understand that power supply is a daily necessity of the people, and said hopefully:

“They will, having considered their operating environment, the high unemployment and deflation, understand the difficulties and heed the expectations of public.”3

But Mr Secretary did not have to hold his breath, for Mr Canning Fok Kin-ning, deputy chairman of Hong Kong Electric Holdings (HEC), reportedly said he found the property developers’ request “bizarre”.4

CLP Power Hong Kong Limited (CLP), the other power producer in Hong Kong, also stated in its 2003 annual report that its electricity tariffs had remained reasonable and affordable.

The debate over Hong Kong’s electricity rates reflects a difference of opinion founded on different bases of comparison using different methodologies. But electricity is of such importance to the daily life of Hong Hong’s six million residents, the operation of its businesses and the overall competitiveness of the city itself that a sound, unbiased framework for evaluation and comparison is called for in order to answer the question “Are Hong Kong electricity users being shafted?”

1 HKE 2003 Annual Report.
2 South China Morning Post, November 4th 2002.
3 South China Morning Post, November 14th 2002.
4 The discussion under this sub-heading is based on information from the following publications: Restructuring Electricity Markets: A World Perspective. Chapter 1, Charles J. Cicchetti, Kristina M. Sepetys; Interconnection and Competition in the Hong Kong Electricity Supply Sector, ERM, Government of the HKSAR, 1999; Electricity Utility Rate Economics, Russell E. Caywoood, 1956; Electricity Market Reform, An IEA Handbook, 1999.
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