ENG-2012 — Page 310

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The Environment

Both power companies are investor-owned. The Government monitors them through mutually agreed Scheme of Control Agreements (SCAs). These require the companies to seek the Government's approval for certain aspects of their development plans, including their projected basic tariff levels. The SCAs do not give the companies any exclusive rights. They are not franchises, nor do they define a supply area for either company, or exclude newcomers to the market. The current SCAs are for 10-year terms ending in 2018, with an option exercisable by the Government to extend for five more years (ie until 2023) after review of the prevailing market conditions.

The permitted rate of return of the power companies on their average net fixed assets is 9.99 per cent. The permitted rate of return is also linked to the emission performance of the power companies in the interest of better environmental protection. The SCAS ensure the continued supply of reliable, safe and efficient electricity at reasonable prices. As stipulated in the current SCAs due to expire in 2018, before implementing any changes to the regulatory regime the Government will take into account all relevant factors, including the availability of new reliable and environmentally sound supply sources, safety, reliability and efficiency, and compatibility with the environmental and economic needs of the community. The Government will also discuss with the power companies market readiness and potential future changes to the electricity supply regulatory framework and transition issue before 2016.

Currently, HEC has a total installed capacity of 3,756 megawatts (MW) at its Lamma Power Station. The Castle Peak Power Company Limited (CAPCO) supplies electricity to CLP Power from its power stations at Black Point (2,500MW), Castle Peak (4,108MW) and Penny's Bay (300MW).

CLP Power and HEC own their respective transmission and distribution systems. The two transmission systems are interconnected by a cross-harbour link, which provides emergency back-up and some sharing of generating capacity reserve between the two systems. The link has a current total capacity of 720 megavoltamperes (MVA).

CLP Power's transmission system is also connected to the electricity network in Guangdong Province which facilitates the export and import of electricity to and from the province. The electricity sold to Guangdong is from CLP Power's existing reserve generating capacity. Its sale is governed by an agreement with the HKSAR Government under which CLP Power's consumers are given priority of supply and 80 per cent of the profit from the sales. At the same time, CLP Power buys about 70 per cent of the power generated by the Guangdong Nuclear Power Station at Daya Bay, which has two 984MW pressurised water reactors, to meet part of the longer-term demand for electricity in its supply area.

According to the memorandum of understanding signed between the HKSAR Government and the National Energy Administration on 28 August 2008, the Central People's Government supported the China Guangdong Nuclear Power Holding Company Limited in the renewal of its supply agreement with Hong Kong for a further term of 20 years. In September 2009, the Government gave approval for CLP Power to extend the contract for the supply of nuclear electricity from Daya Bay Nuclear Power Station for another term of 20 years from 7 May 2014 onwards. The quantity of electricity supply will be no less than the current level.

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