Ref. PELB(CR) 55/07

Legislative Council
Panel on Environmental Affairs

PURPOSE

This paper reports on the implementation of the various changes to the Trade Effluent Surcharge (TES) scheme proposed in the TES Review.

BACKGROUND

The Charging Scheme

2. The sewage charging scheme was implemented in April 1995. It is based on the Polluter Pays Principle that all those who create pollution pay their proportionate share of the costs of cleaning it up. The scheme comprises two components - a sewage charge (SC) and a TES. SC is a general charge payable by all water consumers discharging wastewater into the public sewerage system. Certain trades and industries discharge effluent at a strength higher than that of domestic sewage. As a result, a TES which reflects the additional cost of treating the stronger sewage is payable by 30 trades and industries. Charges are calculated according to the volume and strength of wastewater discharged.

3. The strength of effluent is measured by the Chemical Oxygen Demand (COD) readings of wastewater. The higher the COD value, the higher the treatment cost and hence the higher the TES rate. For simplified administration, thereby reducing costs to the public and to the trades, an average COD value is assigned to a trade to represent the strength of wastewater discharged. The volume of effluent discharged is determined based on the metered water supply data. It is recognised that, for some trades, not all water supplied would be discharged direct to sewers because part of it may be used in products or lost to the atmosphere via evaporation. A system of discharge factors is therefore employed to allow for such losses.

The TES Review

4. When introducing the sewage charging scheme, the Administration undertook to conduct a review of the TES scheme after it had been implemented for one year. The review, which was carried out by a consultant, commenced on 2 October 1996.

The Final Report

5. The TES Final Report was released in April 1997. The Administration conducted a six-week consultation from April to June 1997 to invite the views of interested parties on the outcome of the Review. Both the Advisory Council on the Environment and the then Provisional Legislative Council (PLC) Panel on the Environment were consulted on the Final Report twice during the consultation period.

6. The Review has generally endorsed the basic features of the current TES scheme, which include the use of COD as the pollution parameter; the application of existing generic COD values to all trades; the use of volume and quality of effluent as the technical basis of charging; the charging of "mixed accounts" ("mixed account" is an account with one water meter serving several water outlets for different uses, some of which e.g. restaurants, laundry and bakery, attract TES.); and, the determination of the volume of wastewater discharged from the volume of fresh water supplied. It recommended various changes to other aspects of the TES scheme so as to make the scheme fairer and more straightforward to administer. A list of these recommendations is given in the Annex.

The Administration's Recommendations

7. Among the proposed changes recommended by the TES Review, the Administration considered that the following changes would be sensible:

1. simplifying and streamlining the appeal procedure;
   
   
2. changing the existing charging basis;
   
   
3. introducing an annual adjustment factor to the charging rates;
   
   
4. considering the incorporation of seven more trades into the TES scheme; and
   
   
5. reassessing the discharge factor for six particular trades.
   
   

8. The Administration's considerations and recommendations were presented to the then PLC EA Panel in January 1998. The Administration also informed the then EA Panel that actions would be taken to:

1. draft amendments to the relevant legislation and the Technical Memorandum (TM) to effect the proposed changes to the appeal system (item 7(a)); and
   
   
2. bid for additional funds to carry out a study on possible expansion of the TES scheme (item 7(d)) and discharge factor (item 7(e)).
   
   

PRESENT PROGRESS

Item 7(a)

9. Amendments to the Sewage Services Ordinance, the Sewage Services (Trade Effluent Surcharge) Regulation and the TM are being prepared. We expect to be able to introduce the Amendment Bill and the Amendment Regulation to the legislature for consideration in mid 1999. We will also aim to table the revised Technical Memorandum in the Legislative Council around that time.

Items 7(b) and (c)

10. As the basis for calculating the TES charging rates are not specified in the legislation, the adoption of the proposed new basis do not require legislation amendments. Therefore the new basis will be applied in reviewing the TES charging rates in all future cases.

Items 7(d) & (e)

11. The Administration applied to the Finance Committee (FC) of the then PLC for $14 million on 30 March 1998 to carry out the study to decide whether seven more trades should be incorporated into the TES scheme (item 7(d)) and whether the six particular trades shortlisted by the consultants should be assigned a lower discharge factor (item 7(e)). Some FC members expressed concern about the need to commission yet another consultancy study to re-examine the recommendations of the TES Review. They also expressed concerned about the nuisance the survey would cause to the trades, particularly during the collection of effluent samples. The Administration was asked to re-examine the proposal.

12. The Administration observes that as a matter of equity and in keeping with the Polluter Pays Principle that has been commended by the Legislative Council, any trade that discharges effluent at a strength higher than that of domestic sewage should pay a trade effluent surcharge, to reflect the higher cost to the community of treating this waste. Any decision to impose such a charge must be based on scientific assessment and on an analysis of the cost benefit to the community of imposing the charge. Without funding, it is not possible to carry out a comprehensive scientific assessment that would provide a sound basis for discussing with the trades a reasonable level of charge. Preliminary cost benefit analysis also indicates that the additional costs of extending the TES charging scheme to the seven other trades would be excessive when set against the likely level of charge that the effluent discharges from these trades might incur. In the current economic and financial climate, the administration does not see merit in spending significant sums of public money in order to impose small charges on a number of relatively small businesses.

13. As regards the reassessment of the discharge factors for the six other trades, the Administration considers that a more cost-effective way to address the problem is for account holders who believe that they should be assigned a lower discharge factor to appeal individually, in the same way that they appeal for a lower COD value. The simplification of the appeal procedures that will be introduced will reduce the costs of this appeal process to the appellants and to the public. The Administration therefore does not intend to proceed with this part of the study.

ADVICE SOUGHT

14. This report has been prepared at the request of the Environmental Affairs Panel. Members are invited to note the content of this paper. Representatives from PELB, Drainage Services Department and the Environmental Protection Department will attend the meeting to respond to any questions or requests for further information that Members may have.



Planning, Environment and Lands Bureau
27 July 1998

Annex

1. Simplify and streamline the appeal procedure
   
   - introduce "grab sampling" to make the sampling procedures easier and cheaper to carry out
   
   - allow sampling to be undertaken without advance notice
   
   - allow DSD to initiate appeals
   
   - extend the duration of validity of the successful appeal results
   
   - change the "appeal" approach to a "reassessment" approach
   
   - allow group reassessment
   
   
2. change the existing charging basis (to take into account costs of administration, collection and conveyance of sewage in addition to primary treatment cost and the lower secondary treatment cost attributed to TES).
   
   
3. Introduce an annual adjustment factor to the charging rates (to recover the O&M costs of running the sewage services and provide incentives to the Government to improve its efficiency in administering the sewage services).
   
   
4. Consider incorporating seven more trades (i.e. printing, garage, tobacco manufacture, petrol stations, markets, medical laboratories and barber/beauty shops) into the TES scheme. To carry out a comprehensive sampling and data analysis before making a final decision on this proposal.
   
   
5. Reassess the discharge factors of six particular trades (i.e. soft drinks and carbonated water industries; cocoa, chocolate and sugar confectionery; vermicelli, noodles and other similar products; bakery products; dairy products; soy and other sauces). Further investigation should however be carried out before making a final decision on this proposal.
   
   
6. Introduce another pollution parameter called Total Suspended Solids.
   
   
7. Introduce EPD licence data as a means of agreeing COD levels.
   
   
8. Accept measures of COD values provided by individual traders.
   
   
9. Unify the discharge factors under the sewage charge and TES schemes.
   
   
10. Consider two alternative charging schemes, namely the Trade Effluent Charge and Universal Sewage Charge Schemes.