I
6
ch
WEDNESDAY, NOVEMBER 13, 1991
ON RETURN
INVESTMENT IS "GUARANTEED"
FIRST, THERE IS THE CONCERN THAT THE PERMITTED UNDER THE SCHEME IS TOO HIGH AND THAT IT IRRESPECTIVE OF THE ACTUAL PERFORMANCE OF CLP.
AS I POINTED OUT TO MAXIMUM
PANEL MEMBERS ON MONDAY ALTHOUGH THE CURRENT SCA PROVIDES FOR LEVELS OF RETURN OF 13+ PER CENT ON ASSETS FUNDED BY BORROWINGS AND 15 PER CENT ON ASSETS FUNDED OUT OF SHAREHOLDERS' EQUITY, IN PRACTICE DUE TO VARIOUS COMPULSORY DEDUCTIONS FOR INTEREST ON LOANS ETC. THE ACTUAL OVER RETURN RECEIVED BY EXXON/CLP SHAREHOLDERS HAS AVERAGED ONLY 11%
OF THE PERIOD OF THE CURRENT SCA. THIS LEVEL IS SOMEWHAT BELOW THAT OTHER PUBLIC UTILITIES WHICH ARE NOT SUBJECT TO REGULATORY CONTROL AND ΤΟ WE DO NOT BELIEVE IT TO BE EXCESSIVE, PARTICULARLY HAVING REGARD THE FACT THAT ELECTRICITY RELATED ASSETS HAVE LIFE SPANS OF 20 TO YEARS, MUCH LONGER THAN IN MOST INDUSTRIES.
3D
THE
THE
ANOTHER CONCERN OF WHICH WE WERE AWARE WAS THAT BY LINKING RATE OF PERMITTED RETURN TO THE AVERAGE VALUE OF NET FIXED ASSETS
I BELIEVE THIS CONCERN IS SCA APPEARS TO REWARD OVER-INVESTMENT. MISPLACED FOR, UNDER THE TERMS OF THE SCA THE COMPANIES ARE REQUIRED THEIR TO JUSTIFY TO GOVERNMENT IN GREAT DETAIL THE ASSUMPTIONS BEHIND DEMAND FORECASTS AND THE DEVELOPMENT PLANS THEY CONSIDER NECESSARY MEET THAT DEMAND. THESE PLANS ARE VERY CAREFULLY SCRUTINIZED NOT ONLY CONSULTANTS BY GOVERNMENT OFFICIALS, BUT ALSO BY INDEPENDENT OVERSEAS TO ENSURE THAT THE MOST COST-EFFECTIVE AND ECONOMICAL GENERATING IS SELECTED. NEVERTHELESS, AS A FURTHER SAFEGUARD THE NEW
THAT WHICH HELP TO ENSURE INCORPORATE AMENDMENTS REPLACED PREMATURELY AND THAT ALTERNATIVES SUCH AS EXTEND THE LIFE OF ASSETS ARE FULLY CONSIDERED.
■
PLAN
SCA WILL
ARE ASSETS
NOT REFURBISHMENT ΤΟ
SHOULD ACTUAL
AN ALTERNATIVE PRICE INDEX AS
WE ALSO CONSIDER WHETHER THE BASIS OF ASSESSING PROFIT BE CHANGED. BUT CONCLUDED THAT IN THE LIGHT OF EXPERIENCE AND PERFORMANCE, THE PRESENT BASIS REMAINED APPROPRIATE. SUCH AS PRICE-CAPING BY REFERENCE TO THE CONSUMER SUGGESTED BY ONE MEMBER WILL CERTAINLY NOT HAVE RESULTED IN A 40 CENT REDUCTION IN THE REAL COST OF ELECTRICITY.
PER
WE REFLECTED TO THE ANOTHER AREA OF PUBLIC CONCERN WHICH
EMISSIONS FROM THAT
POWER COMPANIES WAS THE
GIVEN ENVIRONMENT,
ΤΟ THE SO-CALLED ARE THOUGHT TO BE A MAJOR CONTRIBUTOR
THE POWER GASES WHICH
GLOBAL WARMING. ARE LINKED TO
ΤΟ ARE
ENVIRONMENTAL SUBJECT
GOVERNMENT'S
GENERATION
GREENHOUSE
COMPANIES
CONTROLS SUCH AS THE AIR POLLUTION ORDINANCE.
A
LICENCE TO OPERATE. CONDITIONS
ON THE
THIS LICENCE COMPANIES
AS WELL AS BEING
MUST
MORE
THE
ΤΟ
SUBJECT TO THE PROVISIONS OF THIS ORDINANCE THE POWER COMPANIES GENERALLY IMPOSES OBTAIN
BY THAN ARE IMPOSED STRINGENT
PRACTICAL MEANS ORDINANCE, SUCH AS THE NEED TO ADOPT THE BEST MINIMISE EMISSIONS.
AGREEMENT, THEY THE PEAK ENERGY
UNDER THE TERMS OF THE NEW SCHEME OF CONTROL WILL ALSO BE REQUIRED TO PROPOSE STRATEGIES FOR REDUCING LEVELS OF DEMAND FOR POWER AND RESTRAINING GROWTH IN DEMAND BY SAVING THEREBY PUTTING OFF THE NEED TO BRING NEW GENERATING PLANT INTO OPERATION.
/MR. DEPUTY