MONDAY, NOVEMBER 11, 1991
OMELCO BRIEFED ON SCA RE-NEGOTIATIONS
AT A MEETING WITH THE OMELCO ECONOMIC SERVICES AND PUBLIC UTILITIKS PANEL THIS (MONDAY) MORNING, THE SECRETARY FOR BCONOMIC SERVICES, MRS ANSON CHAN, AND HER STAFF BRIEFED MEMBERS ON THE OBJECTIVES AND OPERATION OF THE EXISTING SCHEME OF CONTROL AGREEMENT (SCA) AND ON THE OUTCOME OF RECENT NEGOTIATIONS ON THE RENEWAL OF THE SCA WITH CHINA LIGHT AND POWER CO. LTD AND EXXON ENERGY LTD (THE COMPANIES).
THE SCA, WHICH EXPIRES ON SEPTEMBER 30, 1993, HAS WORKED WELL IN ENSURING THAT CONSUMERS RECEIVE A RELIABLE AND EFFICIENT POWER SUPPLY AT REASONABLE COST. FOR THIS REASON, THE ADMINISTRATION RECOMMENDED AND THE GOVERNOR IN COUNCIL APPROVED IN PRINCIPLE AN EXTENSION OF THE SCA FOR THE COMPANIRS FOR A FURTHER PERIOD OF 15 YEARS.
THE COMPANIES COURSE OF THE
DURING THE BRIKFING, MRS CHAN EXPLAINED THAT HAVE INVESTED OVER $38 BILLION IN ASSETS DURING THE CURRENT AND PREVIOUS SCA'S AND THAT THEY WILL SPEND A FURTHER $17 BILLION IN THE NEXT TWO YEARS.
TARIFF LEVELS, WHICH COMPARE FAVOURABLY WITH THOSE CHARGED BOTH BUROPE AND THE REGION, HAVE ONLY INCREASED BY 12 PER CENT AVERAGE OVER THE PAST 10 YEARS COMPARED TO A 91 PER CENT INCREASE THE CONSUMER PRICE INDEX.
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IN REAL TERMS, THE COST OF ELECTRICITY HAS FALLEN OVER 40 PER CENT IN 10 YEARS, MEMBERS WERE TOLD.
ON THE ISSUE OF PERMITTED RETURN (THE MAXIMUM PROFIT ALLOWED TO SHAREHOLDERS), MEMBERS WERE INFORMED THAT AFTER TOUGH NEGOTIATIONS, THE GOVERNMENT AND THE COMPANIES HAD AGREED THAT THE LEVELS OF PERMITTED RETURN UNDER THE NEW SCA SHOULD BE THE SAME AS THE EXISTING ONES, THAT IS BETWEEN 13.5 PER CENT AND 15 PER CENT ON AVERAGE NBT FIXED ASSETS.
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IN AGREEING TO THIS, THE GOVERNMENT TOOK ACCOUNT OF THE
TOOK IMPORTANCE OF ENCOURAGING CONTINUING INVESTMENT TO MEET GROWING DEMAND.
IT IS ESTIMATED THAT THE COMPANIES WOULD NEED TO INVEST OVER $50 BILLION IN THE NEXT DECADE, MUCH OF IT ON THE PROPOSED NEW STATION AT BLACK POINT.
THE
OFFICIALS ALSO DREW ATTENTION TO THE FACT THAT IN PRACTICE, BECAUSE OF THE COMPULSORY DEDUCTION OF INTEREST REQUIRED UNDER SCA,
SHAREHOLDERS HAVE ACTUALLY RECEIVED AN AVERAGED RETURN OF THAN 11 PER CENT ON AVERAGE NET FIXED ASSETS.
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WHILE THE BASIC TERMS WILL REMAIN THE SAME UNDER THE NEW MEMBERS WERE BRIEFED ON THE CHANGES THAT WOULD BE MADE UNDER THE AGREEMENT TO ENHANCE GOVERNMENT'S ABILITY TO MONITOR THE COMPANIES' OPERATION.
THESE INCLUDE REQUIREMENTS TO DEVELOP PROGRAMMES AIMED AT ENERGY CONSERVATION AND MEASURES TO STRENGTHEN TECHNICAL AND FINANCIAL MONITORING.