Legislative Council Panel on Economic Services Paper : The Hongkong Electric Company Limited Proposals for Additional Generation Facilities and Financial Plan 1999 - 2004

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Introduction

Members were briefed on progress of the Administration's examination of The Hong Kong Electric Company Limited (HEC)'s Financial Plan including its proposed extension of the Lamma Power Station at the meetings of the Panel held on 26 October and 10 November 1998. Since then the HEC had completed a detailed environmental impact assessment for the Lamma Extension, which was endorsed by the Advisory Council on the Environment and the Environmental Protection Department. The Administration has also further reviewed HEC's proposals taking into account the latest demand forecasts, possibilities for meeting the demand through other means and the relevant economic, engineering and environmental considerations.

Latest Development

2. At the meeting of the Executive Council held on 30 May 2000, the Council considered proposals from HEC for additional generation facilities and its Financial Plan 1999 to 2004. Details of HEC's proposals, the Administration's assessment and the Executive Council's decision are set out in the attached Legislative Council Brief.

Way Ahead regarding Interconnection

3. We have explained in detail in the Legislative Council Brief why increased interconnection is not a practically viable alternative to construction of additional generation facilities at the Lamma Extension for meeting the forecast demand in the next few years. The decision to approve the Lamma Extension does not however mean that Government has rejected the idea of increasing interconnection. On the contrary, we see increased interconnection, not just between the two power companies but also with Mainland China, as the logical way forward for the longer term. We are firmly committed to pursuing it earnestly. However, to ensure reliability of supply, we need to sort out a number of engineering and planning issues first. The consultancy study on interconnection and competition in the electricity supply sector completed at the end of last year is only a preliminary feasibility study, and a lot more work has to be done. We have made preparation for further detailed studies on the routing and timing for construction of the new interconnectors as well as the planning criteria for our electric systems under an increased interconnection scenario. These further studies would start in a few months' time and, if everything goes according to plan, we expect them to be completed in the latter half of 2001.

4. In parallel, we are examining the restructuring of the electricity market in other places with a view to identifying practicable options for the Hong Kong market in future. We will need to study the complementary regulatory and institutional structure for increased interconnection. We are also liaising with Mainland authorities regarding market and regulatory reforms in the Mainland with a view to exploring the possibility and scope for the supply of electricity from the Mainland to Hong Kong. We see the importance of coming to an early view on the post 2008 regime and we hope to map out the broad direction for the future development of our electricity sector before the next interim review of the Scheme of Control Agreements scheduled for 2003.

Economic Services Bureau
June 2000