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2018 Tariff Lower than 2013 Despite Tariff Rebound

2018 Tariff Lower than 2013 Despite Tariff Rebound

12 Dec 2017

HK Electric announced today that the Company would continue to offer two special rebates – "Special Rent & Rates Rebate" and "Special Fuel Rebate" to all customers effective 1 January 2018. As a smaller "Special Fuel Rebate" will be offered, together with other annual adjustments, there will be a rebound in the Net Tariff from 110.4 cents to 112.5 cents per unit of electricity in 2018 (See table 1 below), representing an adjustment of 1.9%.

The "Special Rent and Rates Rebate" will be maintained at 4 cents per unit of electricity. As a result of rising operating costs, a drop in electricity sales and other factors, there will be a small increase in the Basic Tariff by 0.2 cents per unit of electricity, bringing the 2018 Net Basic Tariff to rise from 104.9 cents to 105.1 cents per unit of electricity.

The Fuel Clause Charge for 2018 will remain at 23.4 cents while the "Special Fuel Rebate" will be reduced to 16 cents per unit of electricity. As a result, the Net Fuel Clause Charge next year will be adjusted to 7.4 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, explained that the substantial "Special Fuel Rebate" of 17.9 cents per unit of electricity provided by HK Electric in 2017 at a total sum of over 1.9 billion dollars has led to a big drop in the Fuel Clause Recovery Account balance. So a smaller rebate will be offered next year, resulting in a tariff rebound.

"The tariff rebound in 2018 is mainly attributed to a smaller rebate and has little to do with the operating environment of the Company," Mr. Wan said. He added that with a substantial tariff reduction of 17.2% this year followed by a tariff rebound next year, the Net Tariff in 2018 will still be lower than that of 2016 by 15.7 %.

Mr. Wan reminded that HK Electric had made a pledge at the end of 2013 to freeze Net Tariffs from 2014 to 2018 at the 2013 level. Tariffs were frozen in the first two years followed by reductions in the following two years. In 2018, despite a tariff rebound following a smaller Special Fuel Rebate, the Net Tariff will still be 16.6% lower than in 2013 (See table 2 below) compared with the aggregated inflation of 11.7% from 2013 to present. "This demonstrates that we have honoured our commitment to freeze tariff for the five-year period," Mr. Wan concluded.

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 enjoy 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.

Looking ahead, Mr. Wan noted that fuel prices have remained on an upward trend while HK Electric will increase its gas generation from about 34% now to 50% of the total output by 2020. With the increase in both natural gas volume and price, huge pressure on future tariffs is to be expected.

Table 1: Tariff for 2018

Components

2017
cents/unit

2018
cents/unit

Adjustment
cents/unit

Basic Tariff

108.9

109.1

+ 0.2

Special Rent & Rates Rebate

- 4.0

- 4.0

0

Net Basic Tariff

104.9

105.1

+ 0.2

Fuel Clause Charge

23.4

23.4

0

Special Fuel Rebate

- 17.9

- 16.0

+ 1.9

Net Tariff

110.4

112.5

+ 2.1
(1.9%)

Table 2: 2013 - 2018 Net Tariff

2013

cents/unit

2014

cents/unit

2015

cents/unit

2016

cents/unit

2017

cents/unit

2018

cents/unit

Net Tariff

134.9

134.9

134.9

133.4

110.4

112.5