The Regulation of the Hong Kong Electricity Market: Its Problems and the Way Forward

Abstract

The current regulatory scheme of the electricity industry in Hong Kong has provided the two power companies an incentive to over-invest in generation capacity, thus resulting in an excessive amount of underutilized capacity and one of the highest electricity tariffs in the world. This paper outlines the structure of the electricity supply industry and its regulatory arrangement in Hong Kong. The causes and effects of the problems associated with the current regulatory scheme are discussed. And with a view to improve the efficiency of energy uses, a number of policy alternatives, both short-term and long-term, for future market reform are proposed.