Provisional Legislative Council Panel Paper : Hong Kong and China Gas Co. Ltd. Information and Consultation Agreement

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Background

In February 1996, the Government, in response to the Consumer Council Report published in August 1995 with respect to regulatory control of the Hong Kong and China Gas Co. Ltd. (HKCG), considered that the time was right for the Government and the company to enter formally into mutually agreed consultative arrangements designed to increase the transparency of the company's tariff-setting mechanism and its justification for tariff increases, so as to ensure that consumers' interests are protected. It was also considered that these arrangements should be clear and simple.

The HKCG then agreed voluntarily to enter into an Information and Consultation Agreement (the Agreement) with the Government.

Present Position

The Government has, after extensive discussion, entered into a formal Information and Consultation Agreement with the HKCG on 3 April 1997 on terms and conditions that are mutually acceptable. Highlights of the Agreement are given in the following paragraphs.

The Agreement

The HKCG is not subject to any form of regulation by the Government and the Agreement is entered into by the company on a voluntary basis. Its main purposes are to increase the transparency of the HKCG's tariff setting mechanism and the justification of its proposed tariff increases. In pursuing the increased transparency, the HKCG has agreed on disclosure of certain corporate information of the company previously not available to the public and a voluntary process of consultation with the Government.

Key features of the Agreement include :

  1. term of the Agreement
     
    It will last for 3 years until 2 April 2000. No amendment shall be made otherwise than by mutual agreement. Commencing 3 April 1999, the Government and the HKCG will discuss the extension of the Agreement including such amendments that may be required.
     
  2. application of the Agreement
     
    It will apply to the financial affairs of the HKCG's core gas business and gas-related activities in Hong Kong, excluding those associated with export sales of gas.
     
  3. disclosure of corporate information
     
    The HKCG shall furnish financial and operational information concerning the company to the Government on an annual basis. Such information will also be made available to the general public. In addition, the company will provide the Government with information that is directly relevant to the clarification of tariff-setting mechanisms and tariff increases.
     
  4. consultation process
     
    The HKCG shall consult the Government and, upon request, provide briefings to the Energy Advisory Committee and the Panel on Economic Services of the Legislative Council on any tariff adjustments, major system additions or changes in the Fixed Monthly Service Charge. It will also undertake, when so requested, to brief the Energy Advisory Committee and the Economic Services Panel of the Legislative Council on matters concerning the provision of gas to the public.
     
  5. arbitration
     
    All unresolved disputes or differences touching any matter connected with the Agreement or the interpretation thereof between the Government and the HKCG shall be referred for arbitration in Hong Kong by a single arbitrator nominated jointly by both parties.
     
  6. termination
     
    If either the Government or the HKCG considers that the provisions of the Agreement are not operating in the interests of consumers or that of the company, it may terminate the Agreement by notifying the other party in writing with no less than 28 days notice.
     

 

Economic Services Branch
Government Secretariat
April 1997