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HK Electric to Adjust 2020 Tariff with Relief Measures to Mitigate Impacts of Social Unrest

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HK Electric to Adjust 2020 Tariff with Relief Measures to Mitigate Impacts of Social Unrest

10 Dec 2019

HK Electric announced today an adjustment of its tariff for 2020 and the launch of a series of five relief measures. Together with the electricity subsidy schemes to be offered by the Government, it is expected that the annual electricity expenses of almost all HK Electric customers will be lower in 2020 than in 2019. Over 30% residential customers will not need to pay for electricity on an annual basis next year.

The Net Tariff for 2020 will be 126.4 cents per unit of electricity, an increase of 6.3 cents or 5.2% over 2019. The adjustment is lower than the 130.8 cents in the development plan. Excluding the impact of the reduction in two special rebates, the rate of increase will be 1.7% (Table 1).

The Net Tariff comprises the Basic Tariff, Fuel Clause Charge and Special Rebates. With the substantial increase in the use of natural gas for power generation, there will be higher capital expenditure and an increase in fuel cost. The Basic Tariff will increase by 0.7 cents from 101.3 cents in 2019 to 102 cents in 2020 while the Fuel Clause Charge will also be adjusted upward to 24.8 cents per unit of electricity.

After the two substantial rebates – Special Rent & Rates Rebate and Special Fuel Rebate – provided in the past three years, very little balance is left now. As a result, HK Electric has to reduce the “Special Rent & Rates Rebate” significantly from 2.3 cents per unit of electricity in 2019 to 0.4 cents in 2020; while the 2.3-cent "Special Fuel Rebate" will cease in 2020. The changes in these two special rebates constitute the key factor for the adjustment of the 2020 electricity tariff.

Speaking at a meeting of the Legislative Council's Economic Development Panel, Mr. Wan Chi-tin, Managing Director of HK Electric, noted that subsequent to the commissioning of a new gas-fired generating unit early next year to meet the Government's carbon reduction target, HK Electric will increase its gas-fired generation from about 32% now to about 50% of the total electricity generation in 2020. This will incur an additional fuel cost of $500 million in 2020.

Mr. Wan pointed out that at 126.4 cents per unit of electricity, the Net Tariff for 2020 will be comparable to the 123.3 cents in 2011, while inflation is about 30% for the same period.

Mr. Wan remarked that to help the city's small catering establishments tide over the current socio-economic climate, HK Electric will launch a series of relief measures (Table 2). Apart from the electricity bill payment deferral scheme for SME caterers announced earlier, the Company will issue cash dining coupons to underprivileged families for use at SME eateries, so as to help the latter generate additional business.

Each eligible household will be given $500 worth of dining coupons. They include beneficiaries of HK Electric's concessionary tariff schemes (including the elderly, disabled, single-parent families and unemployed), tenants of sub-divided units that do not have separate HK Electric meters as well as other needy families benefiting from Government’s welfare schemes or Community Care Fund.

HK Electric will invite SME caterers within the Company's supply territory to join the scheme. They will be reimbursed according to the actual consumption after the coupons have been presented for use at the participating SME eateries.

At the same time, the Company will provide a cash subsidy of $60,000 each for NGOs in its supply territory to arrange catering activities for the needy involving consumption at SME eateries.

"The SME caterers are one of the hardest hit trades under the current economic downturn and their electricity expenses are generally higher than that of other SME sectors," Mr. Wan explained, adding that the relief measures could serve the dual purpose of benefitting the needy families while generating additional business for the catering trade.

SME caterers aside, HK Electric will provide a 6-month grace period for about 70,000 low-consumption non-residential customers. Eligible customers will have their tariff increase waived for six months in early 2020. The Company will also provide energy-efficient equipment subsidy for non-residential customers including SMEs equivalent to half of equipment cost, capped at $50,000 to $150,000 per account to encourage them to save energy while reducing electricity expenses.

With the five relief measures in place, and together with various subsidy schemes to be provided by Government, it is expected that nearly all of HK Electric's customers would pay less for electricity in 2020 than they do in 2019 (Tables 3 & 4). Residential customers who use 275 units in a month in early 2020 for example will have their tariff reduced from $250.6 to $40.6, which is less than the $183.2 in 2019. Similarly, for non-residential customers who use 1,500 units a month, they will have to pay $448 in early 2020, compared with $1,886.5 before the relief measures and subsidy schemes, or $1792 in 2019.

In addition, over 30% of residential customers will not need to pay for electricity on an annual basis next year.

Table 1: 2020 Tariff Adjustment

Net Tariff

2019 (c / unit)

2020 (c / unit)

Adjustment

Basic Tariff

101.3

102.0

+ 0.7

Fuel Clause Charge

23.4

24.8

+ 1.4

Net Tariff before Special Rebates

124.7

126.8

+ 2.1 (+1.7%)

Special Rent & Rates rebate

- 2.3

- 0.4

+ 1.9

Special Fuel Rebate

- 2.3

-

+ 2.3

Net Tariff after Special Rebates

120.1

126.4

+ 6.3 (+ 5.2%)

Table 2: HK Electric Relief Measures

Measures

Details

For non-residential customers

1. Grace Period

About 70,000 non-residential customers will have their tariff increase for 2020 waived for 6 months in 2020

2. Energy-efficient Equipment Subsidy

Non-residential customers are eligible for 50% subsidy of the equipment cost, capped at $50,000 – 150,000 based on actual equipment type

For SME caterers

3. Electricity Payment Deferral

Eligible SME caterers are invited to apply for 2-month deferral of electricity charges for December 2019 and January 2020

4. Cash Dining Coupons

Underprivileged families are given $500 worth of cash dining coupons for use at SME eateries, benefitting the families and generating business for the catering trade

5. Funding for NGO activities

NGOs will be granted $60,000 each to organise catering activities for people in need, benefitting the latter while generating business for SME caterers

Table 3: Residential Tariff

Monthly Electricity Consumption (unit)

Cumulative Customers (%)

Tariff Charge before Relief Measures (HK$)

Government's Relief Measures (HK$)

Tariff Charge after Relief Measures (HK$)

2019

2020

2019

2020

2019

2020

100

> 10%

74.6

80.6

- 50

- 210

(50 + 160)

24.6

(no charge)

230

> 35%

191.7

206.2

141.7

(no charge)

275

> 45%

233.2

250.6

183.2

40.6

1,000

> 90%

1,160.2

1,223.2

1,110.2

1,1013.2

Table 4: Non-residential Tariff (with Government & HK Electric relief measures)

Monthly Electricity Consumption (unit)

Cumulative Customers (%)

Tariff Charge before Relief Measures (HK$)

Relief Measures  (HK$)

Tariff Charge after Relief Measures (HK$)

2019

2020

2019

2020

2019

2020

HK Electric Grace Period

Govt Electricity Charges Subsidy

500

> 45%

584

615.5

Nil

- 31.50

- 438

584

146

1,500

> 60%

1,792

1,886.5

- 94.50

- 1,344

1,792

448

5,000

> 85%

6,408.5

6,723.5

-

- 5,000

6,408.5

1,723.5

15,000

> 95%

19,598.5

20,543.5

-

- 5,000

19,598.5

15,543.5