A critical assessment of the Hong Kong Government's proposed post-2008 regulatory regime for local electricity utilities

In December 2005, the Hong Kong Government issued a “Consultation Paper on Future Development of the Electricity Markets in Hong Kong: Stage II Consultation,” proposing a post-2008 regulatory regime upon the expiration of the existing regulatory contract between the Hong Kong Government and each of the two local electricity utilities. We assess the proposal using the criteria of safe, reliable, and environmentally friendly service at the lowest rates that will allow the utilities reasonable returns on their investments. We caution that if fully adopted, the highly risky proposal may lead to less-reliable service without the compensating benefits to the environment.