Friday, November 22, 2013

Hong Kong News:2013 Mid-term Review of Scheme of Control Agreements completed (15 Nov 2013)

2013 Mid-term Review of Scheme of Control Agreements completed

     The Government has completed the Mid-term Review of the Scheme of Control Agreements (SCAs) pursuant to the SCAs with the two power companies.  

     A spokesman for the Environment Bureau said today (November 21), "Having regard to public views, our experience in operating the SCAs in the past few years and the latest economic conditions, the Government put forward various proposals for modifying the SCAs to the two power companies, with a view to seeking improvements on the terms and conditions of the SCAs, thereby enhancing benefits to the consumers. Various parties of the SCAs have agreed in principle on certain modifications to be made to the SCAs."

     The main modifications are as follows: 

* The two power companies have agreed to set up an energy efficiency fund out of shareholders' earnings to provide subsidies on a matching basis to non-commercial building owners to carry out works for enhancing the energy efficiency of their buildings. The scheme is expected to be launched in the first half of 2014.

* The two power companies have agreed to raise the performance thresholds for both the incentive payments and the penalties in regard to supply reliability, operational efficiency and customer services.

* The two power companies have agreed to lower the cap on the Tariff Stabilisation Fund balance from 8 per cent to 5 per cent of annual total revenues from sales of electricity to consumers in Hong Kong, with a view to ensuring that the balance of the fund can be used to alleviate the impact of tariff increases on customers as soon as possible.
* The two power companies have agreed to promote transparency of their operations by providing more financial and operating data to the public. They will each set up a dedicated website to disclose such information. 

     "The SCAs stipulate that any proposed modifications to the SCAs have to be agreed on by parties to the SCAs. Under the ambit of the SCAs, which we fully respect and follow, the modifications now agreed on with the power companies represent the package that we could best achieve," the spokesman said.

     "This package of modifications will bring some degree of material benefits to electricity consumers. In particular on energy efficiency, which is a subject of wide public concern, we welcome the two power companies' initiative to set up the energy efficiency fund out of shareholders' earnings. We consider that the initiative by the two power companies is a step forward and has responded to the public's requests to a certain extent. The initiative is also in line with the Government's work on promoting energy efficiency and emissions reduction. We will urge the two power companies to launch the energy efficiency fund as soon as possible to further promote energy saving," the spokesman continued.

     Other modifications, such as enhancing supply reliability, operational efficiency and customer services, as well as lowering the cap on the Tariff Stabilisation Fund balance and enhancing the transparency of the annual tariff review, will also bring benefits to the consumers.

     The spokesman said, "The two power companies considered that no fundamental changes to the SCAs should be made during the Mid-term Review, and hence did not agree to some of the changes proposed by the Government, including the proposed reduction of the permitted rate of return. Following the completion of the Mid-term Review, we will soon commence the review of the regulatory framework for the electricity market. The Government will consider the views and comments received during the Mid-term Review of the SCAs carefully when conducting the relevant review."

     The SCAs signed between the Government and the two power companies set out the returns in respect of electricity-related operations for shareholders of the power companies, and the arrangements by which the Government monitors their financial affairs insofar as they are electricity-related. The current SCAs run for a term of 10 years and will expire in 2018.

Ends/Thursday, November 21, 2013
Issued at HKT 19:16

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