One point stressed in memorandum XCC(80)62 (paragraph 14) was that the Hong Kong Government would have difficulty in explaining away a situation in which Hong Kong consumers were paying more for electricity from the nuclear station than were consumers in China. It now seems inevitable that this would happen in practice. GNPC would sell the power to CLP and to GPC at the same price. But the policy in China apparently is to charge all consumers in China for electricity at the same low tariff which has remained virtually unchanged for many years. In the likely event that this policy remains unchanged, consumers in China would pay much lower tariffs than consumers in Hong Kong would have to pay.
(e) Implications for CLP scheme of control
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Under the scheme of control agreed between the Government and CLP, the company's permitted return (i. e. profits available for distribution to shareholders) is related to the value of its fixed assets. Under the proposed joint venture, CLP would not acquire any fixed assets as .defined in the scheme of control with the exception of its share of the transmission system from the nuclear station to Hong Kong, estimated to cost CLP $1,820 million. Any investment CLP might make through HKNIC in GNPC would be outside the terms of the present scheme of control. CLP have indicated that they may seek agreement with the Government to make some allowance in their permitted return to recognise the fact that by obtaining power from generating plant outside the scheme of control they will forego the opportunity to acquire capital assets which would entitle them to a return. If CLP do put forward a case, Members' advice will be sought on it.
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So far as consumers were concerned the cost of the nuclear project would be reflected in tariffs only when electricity was actually bought. The effect of additional generating plant sited in Hong Kong, on the other hand, is felt as soon as construction is begun, as fixed assets under construction form part of the assets base for scheme of control purposes.
The balance of advantage on the proposals overall
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As far as the Hong Kong Government is concerned, from the economic point of view the issue to be determined is whether, given the information at present available, the Hong Kong Government would be prepared to endorse a financial plan for CLP which would be partially based on the purchase of power for Hong Kong from a nuclear power station in Guangdong.
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are:
The advantages and disadvantages of the project for Hong Kong
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