The 5% tariff reduction set out in the new Scheme of Control Agreements reached between the Government and the city's two power companies is subject to various variables.
Secretary for the Environment KS Wong made the statement to the media today, saying the companies will make tariff estimates every five years to give the public clearer information.
The new agreements will lower the permitted rate of return for the companies from 9.99% to 8%.
He said the 5% estimate is to help the public better understand the implications of the reduced rate of return.
“Based on the change from 9.99% to 8% in terms of the permitted rate of return, the translation into tariff reduction could be more than 5%.”
He added whether the tariff reduction is over or less than 5% is subject to many variables in the future, citing the replacement of ageing coal-fired generators as an example that will lead to tariff hikes.
Mr Wong also said the 15-year time frame for the deals is reasonable as the power companies need to plan for long-term investments.
“In the forthcoming 10 years or so, there are a large number of coal-fired power plants reaching their retirement age. So we need a more stable and certain environment for a strategy, including the investments on replacements.
“Secondly, to echo the Paris Agreement, Hong Kong made a carbon reduction plan towards 2030. So the society should focus on carbon reduction and environmentally-friendly initiatives, so that we can have a reasonable timeline for us to reach our target.”
