Members were informed in June 1978 that a Working Group, consisting of representatives of CLP, HEC and of the Government and chaired by the Secretary for Economic Services, had been set up to explore the various possibilities of an inter- connection between the generating companies, and to assess the advantages to consumers and the environmental and any other benefits to be derived from them. When considering the proposed grant of a site on Lamma to HEC on 26th September 1978, Members were informed that the studies carried out so far showed that considerable savings to consumers could be expected if the systems of CLP and HEC were integrated. This would involve establishing a cross-harbour connection between the two systems which would permit "bulk energy transfer". Such a connection would allow both CLP and HEC to add new generating capacity, in units of a size relevant to the demands of the two systems taken together. They would then buy and sell electricity to each other according to wherever generating capacity lay. It was thought that the savings to consumers, which would arise largely from a reduction in generating plant requirements, could amount to as much as $3,000 million over the period from 1979 to 1992.
5
In the light of the substantial savings to consumers which could be expected from an interconnection between CLP and HEC, and of the advice of the Executive Council as recorded in paragraphs 2(b) and 3 above, the Financial Secretary has met with the company Chairmen to discuss what might be done to establish such a link. The Financial Secretary subsequently wrote to the two Chairmen to record the substance of his discussion with them. The Chairmen have replied confirming their agreement. A copy of the Financial Secretary's letter to Sir Lawrence Kadoorie (the Chairman of CLP) is at Annex A. (A similar letter was sent to Mr P. G. Williams (the Chairman of HEC)). Copies of the replies received by the B, C Financial Secretary are at Annexes B and C.
A
6
It is now proposed to proceed as set out in paragraphs 4 and 5 of the Financial Secretary's letter dated 2nd November 1978 (Annex A). A further report will be made to Members in due course.
C.S. 166
Scheme of Control
7
The grant of the proposed Lamma site to HEC was agreed with the proviso that the lease should not be concluded until a profit control scheme had been agreed with the Company (paragraph 2(a) above). Discussions with the Company concerning the introduction of such a scheme are about to be completed. It is hoped to seek Members' advice on this subject within the next two months.
14th November 1978
(CR 4/4576/77 II)
CONFIDENTIAL