ENG-2013 — Page 292

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The Environment

Natural gas is imported from the Mainland via submarine pipelines to the Black Point, Castle Peak and Lamma Power Stations for electricity generation and to the Tai Po Plant for production of town gas.

The Gas Safety Ordinance regulates the importation, manufacture, storage, transport, supply and use of fuel gas. All gas supply companies, gas installers and contractors must be registered with the Gas Authority (the Director of Electrical and Mechanical Services).

Electricity

The Hongkong Electric Company Limited (HEC) supplies electricity to Hong Kong Island and the neighbouring islands of Ap Lei Chau and Lamma, while CLP Power Hong Kong Limited (CLP Power) supplies Kowloon and the New Territories, including Lantau and several other outlying islands. The electricity supply to consumers is 50 hertz alternating current while the voltage is 220 volts single-phase and 380 volts three-phase.

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 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 community's environmental and economic needs. The government will also discuss with the power companies market readiness and potential future changes to the electricity supply regulatory framework and transition issues. before 2016.

Currently, HEC has a total installed capacity of 3,757 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

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