The Consumer Council submitted to the Environment Bureau today (25 June 2015) its response to the public consultation on the Future Development of the Electricity Market, advocating that the future regulatory regime should include lowering the permitted rate of return, reviewing the rate every five years, encouraging distributed generation and introducing feed-in tariff, etc.
The Council considers the practice of passing on business risks and costs including those arising from overcapacity in generation and changes of fuel price to consumers through a mechanism of fuel cost adjustment and annual tariff review is unfair.
A downward adjustment of the permitted Rate of Return (RoR) from current 9.99% to some point in the range between 5.25% and 6% is proposed which aligns current financial cost benchmark, to safeguard consumer interest.
At the same time, the Council highlights virtue for the Government to review the permitted RoR every five years which would allow the rate to better reflect the ongoing costs of investing and refinancing capital projects. To ensure consumer's right to know, the Government is also urged to uplift transparency of how the permitted RoR is determined.
The Council believes the introduction of competition in generation market, for instance, by way of distributed generation, can improve Hong Kong's overall economic efficiency as well as creating innovation in generation sector that embraces technologies like renewables and cogeneration. Under the new regulatory regime, a mechanism of feed-in tariff should be provided to support development of distributed generation.
A recent research conducted by a green group showed that over 80% of local citizens are supportive of open access to the electricity grid for renewable power generation. Studies also pointed out that Hong Kong has the potential to develop renewable energy resources, like off-shore wind and solar energy.
The Government is urged to act proactively by providing incentive for the deployment of renewable power generation.
The Council believes it important for Hong Kong to have an integrated and holistic energy policy that balances different energy objectives. An Energy Commission needs to be established to ensure policies concerning market accessibility, use of renewables and energy efficiency can all be taken forward in a concerted way.
- 2015.06.25