XN000022-1982-11-24 — Page 20

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WEDNESDAY, NOVEMBER 24, 1982

ADEQUACY OF SAFEGUARD QUERIED

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THE HON SELINA CHOW QUERIED WHETHER THE SCHEMES OF CONTROL FOR THE TWO POWER COMPANIES WERE ADEQUATE TO SAFEGUARD THE INTEREST OF THE PUBLIC IN A MONOPOLY SITUATION.

SPEAKING AT THE LEGISLATIVE COUNCIL TODAY, SHE SAID THAT ALTHOUGH THE GOVERNMENT HAD OFTEN EXPLAINED THE RATIONALE BEHIND USING +NET FIXED ASSETS+ AS THE BASE FOR THE PERCENTAGE OF PERMITTED RETURN, THE PUBLIC WERE NOT TOLD HOW THE FIGURE OF 13.5 PER CENT HAD BEEN ARRIVED AT.

IN THE CASE OF ONE OF THE COMPANIES, SHE NOTED, THE PERCENTAGE OF RETURN ON ASSETS HAD DROPPED OVER THE PAST FIVE YEARS BUT THE ANNUAL INCREASE IN THAT RETURN HAD JUMPED FROM A SINGLE DIGIT INCREASE TO OVER 60 PER CENT IN THE PAST TWO YEARS.

AND ACCORDING TO THE PROJECTION INTO THE NEXT TEN YEARS, ITS CAPITAL INVESTMENT WOULD LIKELY INCREASE FROM $9 BILLION TO $45 BILLION - A GROWTH OF FIVE TIMES.

+ IS THAT FAIR RETURN, OR MORE THAN FAIR RETURN?+ MRS CHOW ASKED.

+THIS ARRANGEMENT IS NOT FAIR TO TODAY'S CONSUMERS, FOR THE POWER COMPANIES ARE INVESTING IN THE FUTURE.

+SINCE ASSETS PAID FOR TODAY WILL NOT START TO GENERATE ELECTRICITY UNTIL SOME FOUR YEARS LATER. CONSUMERS ARE NOW ALREADY PAYING FOR THAT PORTION OF THE PERMITTED RETURN DERIVED FROM THE NON-GENERATING ASSETS.+

AS FOR THE FIVE-YEARLY FINANCIAL PLANS STIPULATED IN THE SCHEMES OF CONTROL, MRS CHOW WONDERED WHETHER CONSUMERS WOULD HAVE TO FACE STEEP INCREASES IF THE RATE OF INCREASE OF ELECTRICITY CONSUMPTION SHOULD FALL SHORT OF THAT ENVISAGED IN THE ORIGINAL PLAN.

SHE NOTED THAT THE DROP IN PERCENTAGE IN THE PERMITTED RETURN AGAINST NET FIXED ASSETS IN RECENT YEARS HAD RESULTED IN THE SIZE OF THE DEVELOPMENT FUND DWINDLING TO SUCH AN EXTENT THAT IT COULD NOT BE RELIED UPON TO ACT AS AN EQUALIZING ACCOUNT AS IT WAS ORIGINALLY INTENDED FOR.

+THIS MIGHT VERY WELL LEAD THE COMPANIES TO SEEK A MAJOR INCREASE IN TARIFFS TO MAKE UP FOR THE SHORTFALL, SHE SAID.

SHE THEREFORE URGED THE GOVERNMENT, WHEN REVIEWING THE SCHEMES BEFORE SEPTEMBER 30 NEXT YEAR, TO CONSULT THE PUBLIC SO THAT THE INTEREST OF THE CONSUMERS WOULD BE PROTECTED.

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