Curb electricity bill hikes

China Light & Power (CLP) reported a 42 percent drop in net profit in the first half (H1) of 2012 over last year. The unfavorable result arises from steep falls in profits from its operations in Australia and India, plus the bleak forecast of a tripling of natural gas prices next year. This dire warning leaves people little doubt the city’s leading power supplier is preparing to raise electricity tariffs across the board at home, presumably to compensate soaring operational costs.

We believe CLP must not be allowed to shift its losses from overseas business flops to consumers at home, by citing the existing Theme of Control Agreement (TCA) with the government. Local authorities must be absolutely firm in their determination to protect consumer interest when assessing CLP’s request for power tariff hikes and strictly separate the figures for Hong Kong operations from losses experienced overseas.

Looking ahead we need power supply legislation to replace the outdated TCA and pick up the pace of opening up the electricity market to bring tariffs down through increased market competition.

Although CLP’s 2012 H1 net profit dropped by 42 percent to HK$3.356 billion from a year earlier, its Hong Kong operation achieved a 4 percent increase in the same period to HK$3.24 billion. Many people suspected CLP of pulling some numbers tricks in negotiations with the government late last year, in order to secure permission for a higher power tariff increase. This year the authorities must be doubly alert against possible attempts to cook the books when it is time again to negotiate with CLP in the later part of this year.

The existing TCA falls far short of public expectations in its lack of transparency, especially when it comes to how operational costs and profits are calculated. These calculations remain a business secret withheld from public knowledge. As a public utility operator, CLP is obligated to be transparent enough for Hong Kong residents to understand how the power production cost is crunched. Otherwise the company will continue to come under suspicion and foment discontent from its customers at home. The government, meanwhile, must be extra diligent to make sure CLP’s business data confirms its need to raise electricity tariffs by a reasonable margin.

This is an excerpted translation of Wen Wei Po editorial published on Aug 15.