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HK Electric to Reduce Tariff for 2016

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HK Electric to Reduce Tariff for 2016

15 Dec 2015

HK Electric announced today that its net tariff would be reduced by 1.5 cents per unit of electricity effective 1 January 2016. All 570,000 HK Electric customers will enjoy a 1.1% tariff reduction from an average of 134.9 cents to 133.4 cents per unit of electricity.

Speaking at a meeting of the Legislative Council's Economic Development Panel, Mr. Wan Chi-tin, Managing Director of HK Electric, noted that HK Electric had frozen tariffs in the past two years, honouring the pledge made in 2013 to freeze net tariff for five years till end 2018. Due to a bigger-than-expected drop in international fuel prices over the past year, reduction in the fuel clause charge will not only fully offset the increase in basic tariff but also enable HK Electric to reduce the net tariff.

Mr. Wan said: “While it is not easy to freeze tariff for two years in a row, the fact that HK Electric could take one step further to reduce tariff testifies to our efforts in controlling costs. Compared with the level in 2008, HK Electric's net tariff over the eight-year period to 2016 has gone up slightly by 6 cents per unit of electricity, or 4.7%, far lower than the inflation rate of about 27% over the same period.”

Rises in material and employee costs, capital and operating expenses, coupled with a drop in electricity sales, have resulted in the need to increase the basic tariff by 2.9 cents per unit of electricity in 2016. However, a reduction of 4.4 cents per unit of electricity in the fuel clause charge as a result of lower fuel prices will fully offset the basic tariff increase and enable HK Electric to reduce the net tariff by 1.5 cents. (see table below)

To reflect the trend of fuel prices, the fuel clause charge per unit of electricity will drop by 13.6%, from 32.3 cents in 2015 to 27.9 cents in 2016, representing a downward adjustment of more than 30% over the past three years when compared with 40.2 cents in 2013.

With the net tariff reduction in 2016, more than 70% of domestic customers, i.e., customers who use 500 units of electricity or below a month, will enjoy a reduction of about $7.5 or less in their monthly electricity bills. About 70% of commercial customers, i.e., those who use 1,700 units of electricity or below a month, will save up to a maximum of $25.5 a month.

HK Electric will continue to provide the "Super Saver Discount" to encourage energy conservation. Domestic customers using no more than 100 units of electricity in any month will be given a 5% discount on their electricity bills. The concessionary tariff schemes to assist those in need will also enable eligible customers – the elderly, disabled, unemployed or single-parent families – to continue to benefit from a 60% discount for the first 200 units each month together with a waiver in the deposit and minimum charge.

Mr. Wan added that in order to achieve the emission targets set by the government, construction of a new gas-fired unit has commenced to replace a retiring older generating unit. At the same time, increasing the use of natural gas for power generation in future will create pressure on fuel costs. Notwithstanding this, the company will continue to control costs and closely monitor the international fuel market, with a view to maintaining electricity tariff at a stable and reasonable level in the long run.

Table: Tariff Reduction for 2016

Components

2015

cents/unit

2016

cents/unit

Adjustment

cents/unit

Basic Tariff

102.6

105.5

+2.9

Fuel Clause Charge

32.3

27.9

- 4.4

Net Tariff

134.9

133.4

- 1.5

(- 1.1%)