2015 Tariff

Presentation to LegCo Panel on Economic Development

16 December 2014

LC Paper No. CB(4)242/14-15(06)

2

2015 Tariff : Key Information

• With CLP’s Energy Saving Rebate, 36% residential

customers and 44% small business customers will see no

tariff increase for three consecutive years, or even a

slight decrease

• Due to increased fuel costs, Average Total Tariff

increases by 3.1%, below inflation rate

3

Extensive Efforts to Alleviate Tariff Pressure • Strenuous effort in optimising fuel usage and expenses

1. Maximize the use of cheaper gas from Yacheng gas field

2. Procure more low emission coal

3. Temporary import of additional nuclear energy from Daya Bay

4. Enhance operation performance of generation plants and emission reduction equipment

These measures help reduce the usage of the more expensive gas supplies from the second West-East Gas Pipeline (WEPII)

• Prudent cost management and recent downward trends in fuel prices,

together with the use of Fuel Clause Account, help mitigate overall

tariff impact

• CLP will continue to work diligently in containing tariff increase to a

minimum level

4

2015 Tariff Summary

Tariff Component (¢/kWh) 2014 Tariff Change 2015 Tariff

Average Basic Tariff 88.4 -1.2 87.2

Fuel Cost Adjustment 22.4 +4.6 27.0

Average Total Tariff 110.8 +3.4 114.2 (+3.1%)

With CLP’s Energy Saving Rebate, 36% residential customers and

44% small business customers will see no tariff increase

for three consecutive years, or even a slight decrease

5

Reasonable Tariff with World-class Reliability

0

1

2

3

CLP Power Singapore London Sydney New York

Remarks:

Comparison based on average monthly domestic consumption of 275kWh

Tariff and exchange rate at Nov 2014

HK$/kWh

Low Tariff High Reliability

CLP 2015 tariff adjustment Remarks: 2011-2013 average

0.42.3

1619

30

0.0

10.0

20.0

30.0

40.0

50.0

0.5 CLP Power

Unplanned customer

minutes lost per year

Sydney

(CBD)

New York London Singapore

More Reliable Less Reliable

6

Reasonable Electricity Tariff in Hong Kong

Source : “2009/10 Household Expenditure Survey and the Rebasing of the

Consumer Price Indices”, HKSAR Government

Food

27.1%

Gas and water

1.3%

Clothing and

Footwear 4.0%Durable goods

4.1%

Transport 8.3%

Housing

32.8%

Alcoholic drinks

& tabacco 0.6%

Miscellaneous

20.3%

Household Expenditure Survey

Electricity 1.6%

7

Basic Tariff still Below 1998 Level Rising Fuel Cost – Key Driver for Tariff Increase

-20

0

20

40

60

80

100

1998 2000 2002 2004 2006 2008 2010 2012 2014

HK¢/kWh

Average Net Tariff

Basic Tariff

Fuel Cost Adjustment

87.2

89.1

8

2014 2015

Significantly Tighter Emissions Caps, Fuel Costs Increase by 50%

Total fuel cost increased by 50%

2015 emissions caps are set with reference to the gas generation capacity

in HK, ~80% are under CLP

0

5

10

15

20

25

30

35

40

45

2014 2015

To

tal E

mis

sio

ns

(kilo

ton

nes

)

RSP

SO2

NOx

-35%

-65%-36%

Emission Caps

9

With Higher Use of Natural Gas, Total Fuel Costs in 2015 to Rise to Approximately HK$15.5b

0

5

10

15

20

2003 2006 2009 2012 2015e

HK$ billion Fuel Costs

2015 emissions cap kicks in

10

Highly Volatile Fuel Prices

0

50

100

150

200

250

300

350

400

450

500

Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

HK Local Inflation CPI(A) Coal price (globalCOAL index) Japanese LNG Import Price

11

Extensive Efforts to Alleviate Tariff Pressure • 2015 total tariff increase is below inflation rate

• Strenuous effort in optimising fuel usage and expenses

1. Maximize the use of cheaper gas from Yacheng gas field

2. Procure more low emission coal

3. Temporary import of additional nuclear energy from Daya Bay

4. Enhance operation performance of generation plants and emission reduction equipment

These measures help reduce the usage of the more expensive gas supplies from the second West-East Gas Pipeline (WEPII)

• Prudent cost management and recent downward trends in fuel prices,

together with the use of Fuel Clause Account, help mitigate overall

tariff impact

• CLP will continue to work diligently in containing tariff increase to a

minimum level

12

Fuel Clause Account (FCA) Helps Alleviate Tariff Increase

2.88 0.55

15.45

2.33

13.12

0

2

4

6

8

10

12

14

16

2014 year-end 2015 year-end

HK

$ b

illi

on

Total fuel costs in

2015 Fuel cost recovered from tariff

FCA drawdown reduces tariff requirement

2014 year-end estimate

Fuel Cost Adjustment increase

2015 year-end estimate

13

Energy Saving Tools and Measures for Customers Energy Billboard Home Energy Report

CLP Eco Building Fund

14

Public Education on Environmental Protection

Green Elites Portal cum Award Scheme Green Elites Campus Accreditation Pilot Programme

15

Committed to Serving the Community

Hotmeal Canteen

CLP Subsidy Programme for Energy Efficient Electrical Appliances

LED Light Bulbs Replacement

Community Care Subsidy Scheme

16

Commitment to Serving Hong Kong

• CLP has been serving Hong Kong for 113 years. With our

power expertise, we fulfill our community commitment

by providing reliable electricity supply and meeting the

community’s expectation of a cleaner environment

• We understand the concern of the community and we

endeavour to work with and support the community

2015 Tariff

Presentation to LegCo Panel on Economic Development

16 December 2014