The Hongkong Electric Company, Limited (HEC) today announced that the basic tariff will be frozen and a special rebate will continue to be provided in order to limit the tariff increase for 2006. Effective 1 January 2006, the average net tariff will be increased by 7.2%.

HEC’s Managing Director, Mr. Tso Kai-sum, said he believes that this level of adjustment appropriately balances the interests of shareholders and customers. “We have taken every effort to limit the increase to the minimum,” Mr. Tso said, noting that 2006 will be the fourth consecutive year that Hongkong Electric shareholders will not achieve the permitted level of return.

Following the adjustment, the average net tariff will be $1.179 (see table below). Over 70% of HEC’s domestic customers who use 500 units or below monthly will have their tariff increased by less than $29.5 a month. For 70% of non-domestic customers who use 1,700 units or below monthly, the increase is less than $146.2 a month.

Mr. Tso recalled that amid soaring coal prices and increased government rent and rates last year, HEC shareholders offered a special rebate of 7.1 cents per unit of electricity to ease the burden of the tariff increase on customers in 2005.

“The local economy has since recovered significantly, and with Hong Kong’s GDP growth expected to be over 7% for 2005, our shareholders cannot be expected to maintain the same level of contributions in 2006,” he said.

“Despite this, they will continue to offer a special rebate of 1.9 cents per unit of electricity in the coming year to moderate the tariff increase. This contribution will amount to $200 million, which, together with the permitted return forfeited as a result of freezing the basic tariff, represents a total contribution from shareholders of over $700 million for 2006,” Mr. Tso said.

He explained further that the tariff adjustment was also required to cover the increase in the Fuel Clause Surcharge by 2.7 cents per unit of electricity.

 “We will be introducing the use of natural gas next year. It is environmentally friendly but expensive. Also, we need to gradually reduce the debit balance in the Fuel Clause Account which has built up over the past few difficult years,” he said.

Mr. Tso stressed that the tariff increase had been kept to the lowest possible level. “HEC takes its social responsibility very seriously. This is demonstrated by our shareholders’ significant contributions amounting to over $2 billion that they have foregone in permitted profits between 2003 and 2005 through various rebates and other measures to contain tariff increases.”

Net Tariff for 2006
(Cents/ kWh)