Provisional Legislative Council

PLC Paper No. CB(1) 837

Ref: CB1/PL/ES/1

Panel on Economic Services

Minutes of meeting held on Monday, 1 December 1997, at 10:45 am in Conference Room A of the Legislative Council Building

Members present :

Hon James TIEN Pei-chun, JP (Chairman)
Dr Hon LAW Cheung-kwok (Deputy Chairman)
Hon Allen LEE, JP
Hon Henry WU
Hon Henry TANG Ying-yen, JP
Hon CHAN Choi-hi
Hon CHAN Yuen-han
Hon CHAN Kam-lam
Hon Howard YOUNG, JP
Dr Hon Charles YEUNG Chun-kam
Hon Mrs Miriam LAU Kin-yee, JP
Hon Ambrose LAU Hon-chuen, JP
Hon LO Suk-ching
Hon TAM Yiu-chung, JP

Member attending :

Hon LEE Kai-ming

Members absent :

Hon HO Sai-chu, JP
Dr Hon David LI Kwok-po, JP
Hon YUEN Mo
Hon Paul CHENG Ming-fun, JP

Public officers attending :

Mr Stephen IP, JP

Secretary for Economic Services

For item IV only

Ms Maria KWAN

Deputy Secretary for Economic Services

Ms Linda LAI

Principal Assistant Secretary for Economic Services

Mr R A Siegel

Director of Civil Aviation

For item V only

Mr Leo KWAN

Deputy Secretary for Economic Services

Mr LI Kwok-tso

Principal Assistant Secretary for Economic Services

Attendance by invitation :

For item IV only

Airport Authority

Dr Henry Townsend

Chief Executive Officer

Mr Chern Heed

Airport Management Director

Mr Josiah KWOK

Legal Director

Ms Caroline CHOW

Lawyer

For item V only

Hong Kong Electric Co Ltd

Mr K S TSO

Managing Director

Mr Lawrence DO

General Manager (Finance)

Mr Gary CHANG

General Manager (Development & Planning)

Mr Steve NG

Deputy Chief Accountant

Clerk in attendance :

Ms Estella CHAN

Chief Assistant Secretary (1)4

Staff in attendance :

Miss Connie FUNG

Assistant Legal Adviser 3

Mr Andy LAU

Senior Assistant Secretary (1)6

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I. Confirmation of minutes and matters arising

(PLC Paper No. CB(1)455 - minutes of meeting held on 11 October 1997)

1.The minutes of the meeting held on 11 October 1997 were confirmed.

II. Information papers issued since last meeting

(PLC Paper No. CB(1)459 - information paper on "Electricity : Demand Side Management"

PLC Paper No. CB(1)502 - information paper on the import and retail prices of major fuels from October 1995 to September 1997

PLC Paper No. CB(1)510 - information paper on the creation of a permanent Chief Operations Officer post in the Civil Aviation Department)

2.Members noted that three information papers had been issued since the last meeting.

III Items for discussion at the next meeting scheduled for 5 January 1998

3.Members noted that two deputations had lodged complaints with the Complaints Division about the Mainland Fishermen Deckhands Scheme. In response to the request of Duty Roster Members who received the deputations, the Panel agreed to discuss the issue at the next meeting scheduled for 5 January 1997.

4.The Chairman said that members could inform the Clerk after the meeting of any other items which they wished to discuss at the next meeting.

IV Briefing on Airport Authority Bylaw

(Provisional Legislative Council Brief - File Ref: ESBCR 10/935/96 dated 25 November 1997)

5.A site plan of Hong Kong's new airport at Chek Lap Kok showing the wide range of facilities available in 1998 was tabled at the meeting for members’ reference.

6.At the invitation of the Chairman, the Legal Director of the Airport Authority (LD/AA) briefed members on the main provisions in different parts of the Airport Authority Bylaw (the Bylaw). He said that the objectives of the Bylaw were to facilitate the Airport Authority (AA) in managing the new airport at Chek Lap Kok effectively and in ensuring the safety and efficiency in airport operations. Most of its provisions were modelled on the existing Hong Kong Airport (Regulations) Ordinance (Cap. 292) and its subsidiary legislation which applied to the Kai Tak Airport. In the light of the experience with the Kai Tak Airport, and taking into account the size of the airport island and the facilities to be made available, some new provisions had been included to cater for the changed circumstances. He said that a major difference between the existing provisions in Cap. 292 and its subsidiary legislation and those of the Bylaw lied in the management and control of the landside traffic. Since AA would also be responsible for managing the extensive road network on the airport island (a situation different from that at Kai Tak Airport), suitable provisions had been included to empower the AA to control vehicular traffic outside the restricted area. In drawing up the Bylaw, references had also been made to the Mass Transit Railway Corporation By-laws (Cap. 270 sub. leg.) and the Kowloon-Canton Railway Corporation By-laws (Cap. 372 sub. leg.).

7.Referring to existing problems encountered by the authority in controlling touting activities outside the departure hall of Kai Tak Airport, LD/AA said that areas outside the airport were public roads which were outside the ambit of the Civil Aviation Department. There had hence been problems in the enforcement of the relevant legislation. To improve the situation, the proposed Bylaw provided that the whole airport island in Chek Lap Kok would be designated as Bylaw Area and that no person would be allowed to carry out hawking and touting activities in any part of the Bylaw Area except with the permission of the AA. This would facilitate enforcement of the Bylaw by AA.

8.In response to a member and referring to the map tabled at the meeting, LD/AA said that the area delineated as "Aircraft Maintenance" was to be declared as a Sub-Leased Area.

9.In response to a member's question on whether section 41 of the Bylaw on removal of aircraft would apply to military aircraft owned by the People's Liberation Army (PLA), LD/AA said that section 41 was intended to empower AA to move or remove any aircraft on the movement area for security, safety or operational reasons, for example, in the case of an accident. In this regard, there was no difference between a military aircraft or a civilian aircraft under the provision of section 41. In response to the member's further question, the Director of Civil Aviation (DCA) said that the PLA did not have a designated parking area in Chek Lap Kok airport.

10.Regarding the possible conflict on the use of the airport between the civilian and military aircraft, DCA advised that there was no such problem even at the congested Kai Tak Airport. With improved capacity in the new airport at Chek Lap Kok and proper scheduling, it should be easy to find a time slot for use by military aircraft.

11.Regarding whether liquefied petroleum gas vehicle would be allowed to operate in the airport area, the Chief Executive Officer, AA said that in order to better protect the environment, the use of LPG vehicles as well as other environmentally friendly vehicles such as electric vehicles would be encouraged.

12.In response to a member, LD/AA advised that penalties for offences under the Bylaw were drawn up with reference to comparable offences stipulated in the Crimes Ordinance (Cap. 200). Details of the fines were as follows:

13.Given the nature of the offences, a member opined that some of the penalties seemed to be quite severe. In response, LD/AA said that the penalties detailed in Schedule 4 of the Bylaw were the statutory maximum penalties and the exact penalties would be subject to the decision of the court. In this regard, the Deputy Secretary for Economic Services advised that the proposed penalties had been considered by the Department of Justice and should be comparable to other similar offences in the Hong Kong Laws.

14.The Chairman pointed out that the legislative timetable suggested by the Administration was very tight. Given the fact that the general public had not been consulted on the proposed Bylaw and that a decision had yet to be made by the House Committee on whether a subcommittee should be formed to scrutinize the Bylaw in detail, the Chairman enquired about the possible implications of revising the legislative timetable.

15.In reply, the Secretary for Economic Services (SES) said that for the safe and efficient operation of the new airport, the Bylaw had to be put in place before airport opening. It was also needed for the safe and orderly conduct of airport trials scheduled to start in January 1998. Deferral of the passage of the Bylaw would impact on the overall programme of the airport development. As most provisions in the Bylaw were modelled on existing legislation and the existing legislation had been working well, the Administration hoped that formation of a subcommittee would not be necessary and that the Provisional Legislative Council would endorse the Bylaw at the Council meeting on 17 December 1997. By briefing the Panel on the Bylaw, the Administration hoped to provide adequate information to allay any concerns about the provisions. He said that the Administration would be happy to provide additional papers on the Bylaw for members’ information if necessary.

16.A member pointed out that it had long been a practice for the Administration to submit legislative proposals to the relevant Panels for examination so that members could examine the policy objectives of the proposals before the legal aspects were considered. However, even with this arrangement, it might still be necessary to form a subcommittee to study the detailed provisions. In response, SES said that in view of the non-controversial nature of the Bylaw and time constraint, and taking into account the fact that it was modelled on existing legislation, he hoped that members would consider not setting up a subcommittee in this particular case.

17.At members’ request, the Administration undertook to prepare a table showing the differences between the Bylaw and the Hong Kong Airport (Regulations) Ordinance (Cap 292) and marked-up version of the Bylaw showing such differences.

(Post meeting note : The Administration had provided a comparison table of the proposed Bylaw and the Hong Kong Airport (Regulations) Ordinance (Cap 292) on 4 December 1997 and the information was circulated to members vide PLC Paper No. CB(1) 609 on the same date. A letter from the Administration explaining that it was not practicable to mark up the Bylaw against the existing legislative provisions for Kai Tak was received and circulated on 5 December 1997 under PLC Paper No. CB(1) 612.)

18.In response to a member, DCA said that the existing Hong Kong Airport (Regulations) Ordinance (Cap. 292) and its subsidiary legislation would need to be repealed as appropriate. However, he said that some of the provisions, for example, those relating to the control of aircraft noise would still be applicable in the airport at Chek Lap Kok. The Administration would identify these provisions and introduce suitable legislative amendments in due course.

V Hong Kong Electric Co. Ltd.'s proposed tariff revision

19.At the invitation of the Chairman, the Managing Director, Hong Kong Electric Co. Ltd. (MD/HEC) conducted a presentation on HEC's tariff increase with effect from 1 January 1998. Bound copies of the presentation material were distributed at the meeting for members’ reference.

20.In response to a member's question on justifications for the tariff adjustment, MD/HEC said that this was mainly attributable to the increase in operating costs due to inflation and the anticipated higher finance charges due to the upsurge of interest rates and increased borrowing in 1998. To strike a proper balance between the interests of the general public and those of the investors, the proposed increase was already very moderate and was also lower than those of other public utilities and services. The tariff adjustments for different categories of customers were as follows:

	Average increase
Domestic customers	3 cents per kWh (3.5%)
Commercial customers	4.4 cents per kWh (4.89%)
Industrial customers	4.3 cents per kWh (4.86%)
Overall average increase	3.9 cents per kWh (4.51%)

21.In response to a member's further question, MD/HEC said that the rate of increase for domestic customers with a monthly consumption of over 1000 kWh would be 4.25%.

22.MD/HEC further said that upon the tariff adjustment in January 1998, an annual return equivalent to some 12% of HEC's average net fixed assets (ANFA) was expected, comparable to the rates of return in previous years. The company would continue to explore ways to improve efficiency and productivity. In this regard and in response to a member's question, MD/HEC advised that HEC would examine matters relating to bi-monthly billing system to see if the concept would be feasible in achieving cost savings.

23.Noting from the information paper that HEC's domestic electricity tariff was much lower than those of other cities, a member enquired the reason for not making reference to other South East Asian Countries such as Singapore, Malaysia and Thailand. MD/HEC responded that these countries were excluded from the comparison because unlike Hong Kong and other cities, their electricity utilities were government owned.

24.Some members expressed concern about the higher rate of tariff increase for commercial and industrial users as compared to domestic users. They opined that in the light of the prevailing economic condition, even a small percentage increase would result in a heavy burden on enterprises. They asked HEC to consider lowering the rate of increase for small to medium sized commercial and industrial users so as to help improve their competitiveness. The Chairman also suggested that a progressive rate of increase for small to medium sized enterprises, similar to that of domestic users, could be considered.

25.MD/HEC responded that in order to cater for the peak demand generated by commercial and industrial users, the company had to make substantial investments on power plants and other equipment. As such, end-users would be required to contribute more in this regard. Notwithstanding the above, the proposed increases for business and industrial users were very moderate indeed. Assuming that the electricity consumption for a typical office was 2.5 kWh per square foot, the tariff revision of 4.4 cents per kWh for commercial customers would mean an increase of 11 cents per square foot, which was minimal when compared with the average monthly rental of $25 dollars per square foot.

HEC

26.In response to the Chairman and a member, MD/HEC said that presently around 66% of the company's income was generated from commercial users, 24% from domestic users, 5% from industrial users and the remaining 5% from other users such as government. The cumulative percentage increase of electricity tariff for the period from 1994 to 1997 was 11%. At members’ request, MD/HEC undertook to provide further information on the monthly consumption of electricity for commercial and industrial users and the impact of the proposed tariff adjustment on these users, as well as the history of tariff adjustments for commercial and industrial users from 1993 to 1997.

(Post meeting note : The requested information was circulated to members vide PLC Paper No. CB(1) 629 dated 9 December 1997)

27.In response to a member's question on actions taken in respect of demand side management and the effectiveness of the measures, the General Manager (Development & Planning), HEC (GM/HEC) advised that the Government and HEC entered into a formal Demand Side Management (DSM) Agreement on 5 November 1997. In this regard, HEC would submit their detailed programme proposals to the Government by February 1998 with a view to implementing the various proposals in May 1998.

28.As to the company's other initiatives to promote energy saving, GM/HEC advised that the company had restructured its charging system in 1993 with a view to encouraging energy conservation. Instead of giving discounts to users of high consumption, a progressive charging system based on consumption was introduced to discourage high usage. A series of pilot programmes to replace old lighting systems with energy efficient lighting systems had been launched in selected public housing estates, schools and office buildings. An educational programme on energy conservation targeted at primary 4 to primary 6 students had been developed. Furthermore, a centre had been set up at the Science Museum to promote energy saving.

29.A member opined that developers in Hong Kong were not concerned about the design and construction of energy efficient buildings. He suggested that HEC should set up a bulb exchange centre to promote the use of high efficiency light bulbs. The company should also consider subsidizing owners/tenants in installing insulated windows in order to conserve energy.

30.In reply, MD/HEC said that the company would work hand-in-hand with the Government to promote efficient use of energy. The company had plans to promote greater use of high efficiency light bulbs and replacement programmes would be launched next year. Regarding the replacement programme of insulated windows, he said that it would be more effective for suitable legislation to be in place to enforce such a requirement. Over time, it was hoped that a culture of energy saving would be developed in the community. SES added that the Government was committed to promoting the use of high efficiency appliances. They would also discuss with developers on adopting building designs which would be conducive to energy saving.

31.Noting that the company was mainly financed by shareholders and that a 12% return on ANFA was expected, the Chairman opined that it might be more cost effective for the company to finance its projects through borrowing in the money market, thereby reducing the pressure on tariff adjustments. A member also enquired whether the company was prepared to borrow US dollars instead of HK dollars to save interest cost. MD/HEC said that some 47% of the company's capital had all along been funded by shareholders. Whilst there might be a certain degree of currency risk in borrowing US dollars, the company would carefully consider the implications, and where appropriate, increase the proportion of borrowing in this respect to achieve higher cost efficiency.

32.On the disclosure of the projected revenue of the company, MD/HEC said that the company could not release the financial information of the company which was commercially sensitive prior to the release of the annual report. Regarding the projected electricity consumption, he advised that the estimation was 9,060 million kWh and 9,500 million kWh for 1997 and 1998 respectively.

VI Any other business

33.There being no other business, the meeting ended at 12:15 pm.

Provisional Legislative Council Secretariat
22 January 1998