Hong Kong's power companies under pressure to cut tariffs

A new agreement with the government puts Hong Kong's power companies, CLP Holdings and Hong Kong Electric Holdings, under pressure to make double-digit cuts in their tariffs as soon as October, The Standard reported Tuesday.

On Monday, the government signed a deal with the power companies reducing their rate of return for the next 10 years from 13.5-15.0 percent to 9.99 percent.

CLP and Hong Kong did not say how much they will reduce tariffs by, but analysts estimate the cuts at 12 percent for CLP's customers and around 20 percent for Hong Kong Electric's.

The newspaper cited quoted Environment Secretary Edward Yau Tang-wah as predicting that the new arrangement could reduce the amount paid for electricity by residential and commercial consumers by as much as 5 billion Hong Kong dollars per year.

Recently CLP increased its power tariff by 4.6 percent and Hong Kong Electric by 6.0 percent because of increased fuel costs.

The new scheme was announced after two years of discussion between the government and the power companies, and two rounds of public consultations - in 2005 and 2006.

The new Scheme of Control agreement will last for 10 years instead of the usual 15 years, The Standard said.

(1 US dollar = 7.80 Hong Kong dollars)