Hongkong Electric today announced a 2.5% increase in its electricity tariff for 2007, reflecting mainly the increase in fuel costs as well as the cancellation of the special rebate for customers in the wake of a full economic recovery in Hong Kong.

Attending the Legislative Council meeting on electricity tariffs for 2007 today, the Managing Director of the Hongkong Electric Company Limited, Mr. Tso Kai-sum, said that the average net tariff would be increased to $1.203 effective 1 January 2007. 

Mr. Tso stressed that the decision was taken after balancing the interests of shareholders and customers. He said the average basic tariff would be frozen in 2007 to mitigate the tariff increase, noting that it will be the fifth consecutive year in which Hongkong Electric will not be earning the permitted return.

Responding to public concern about the environment, Mr. Tso said that Hongkong Electric introduced the use of natural gas to generate electricity earlier this year. Following the commissioning of the new gas-fired unit, the fuel clause surcharge has to be increased by 1 cent per unit since natural gas is cleaner but more costly as compared with coal.

He further said that the special rebate of 1.9 cents per unit of electricity will be cancelled. “This special rebate was a temporary measure put in place to assist Hong Kong’s economic recovery. With Hong Kong’s GDP growth estimated to be 6.5% for 2006, there is no need to continue with the special rebate under such a robust economic climate,” Mr. Tso explained.

Following the tariff adjustment, 70% of Hongkong Electric’s domestic customers who use 500 units or below monthly will have an increase of less than $12 a month, while for 70% of non-domestic customers who use 1,700 units or below monthly, the increase is less than $51 a month.

As electricity tariffs only account for about 2% of the average household expenditure, and less than 5% of the operating costs for non-domestic customers, Mr. Tso believes that the adjustment will have minimal impact on customers.

“Since the average basic tariff in 2007 will be unchanged from 2005 levels, a shortfall in permitted return of over $400 million is expected for 2007,” Mr. Tso said.

“In fact, Hongkong Electric has already contributed approximately $3 billion from 2003 to 2006 in the form of shortfall in permitted return and special rebates in order to limit tariff increases. This clearly demonstrates our continuing commitment to the community,” he added.

Hongkong Electric will continue to provide assistance to the needy through its Concessionary Tariff Scheme, which offers up to 60% discount on tariffs for the first 200 units of electricity for eligible applicants. Deposit and minimum charge payments will also continue to be waived.

Net Tariff for 2007

(Cents/ kWh)