The government will launch a public consultation on the development of the post-2008 electricity market within a few months, according to Secretary for Economic Development and Labour Stephen Ip.

He disclosed this in a written reply yesterday to legislator Audrey Eu's enquiry on the scheme of control agreements between the government and two electricity suppliers - CLP Power and Hong Kong Electric Company Ltd.

The scheme, which governs the two companies' profits and investment, will expire in 2008. Under the scheme, the power companies are allowed to earn a profit of between 13.5 per cent and 15 per cent on the value of their net fixed assets in use.

Amid a high crude oil price, CLP earlier warned of possible tariff rises to offset increasing fuel costs.

Ip said the government plans to carry out two rounds of consultation - the first in the next few months and the second in the next year.

In the first round of consultation, the government will collect citizens' views on possible options for the development of the future power market. In the second, the government will map out a development blueprint, he said.

"We are now preparing a public consultation document to seek the views of the public and the stakeholders, including the two power companies, on the development of the post-2008 electricity market."

In response, CLP Power yesterday welcomed the government's move to launch a public consultation.

"CLP Power will keep an open mind in discussing the matter of the post-2008 electricity market development with the government," the company's spokeswoman noted.

Hong Kong Electric Company Ltd yesterday said the company will discuss with the government to establish a regulatory mechanism most suitable for Hong Kong.

The company believes supply reliability should be a primary consideration, a spokesperson said.

The existing scheme has been criticized as outdated and encouraging over-investment in the community.

Meanwhile, Ip said the government will study the environmental protection requirements imposed on the two electricity suppliers and how renewable energy can be included in the future market.

In formulating proposals for environmental regulation, the Environment, Transport and Works Bureau will study the technical feasibility, consumers' affordability and other aspects of renewable energy.

Green Power's Chief Executive Man Chi-sum yesterday called on the government to speed up the pace of pushing local power suppliers to introduce renewable energy.

"Coal is partly used as a power generator. During the coal-burning process to generate power, pollutants like sulphur dioxide and nitrogen oxide will be released into the air and cause air pollution," said Man.

"Using renewable energy can help solve serious air-pollution problem in Hong Kong."

(China Daily November 4, 2004)