An Analysis Of The Effect Of Competition Enhancement In The Hong Kong Electricity Market On The Electricity Company, CLP Power Hong Kong Limited

Because of the historical and economical development, in the past decade, there were only two investor-owned geographically monopolized power companies operating in the Hong Kong electricity market under the "Scheme of Control" agreement which is going to expire in 2008. The aim of our study is to investigate the operation of the current electricity market and the performance of the electricity companies, so as to evaluate the effectiveness of the SoC and the feasibility of enhancing competition into the electricity market and the effect thereon the electricity companies.Through the study of the theory on government regulation and competition, it is realized that the natural monopolistic characteristic of the electricity industry has been changed as a result of the technological and economical development, which has driven a revolutionary change on the structuring of the electricity market and regulatory policy of various governments on the electricity industry.With reference to the experience of different countries on introducing competition to the electricity market, it is forecasted that in 2008 when the SoC agreement expires, competition will be enhanced from the wholesale and generation level of the electricity market in Hong Kong. The government is expected to improve the structural problem of the current electricity market by increasing interconnection between Hong Kong's two electricity supply companies and encouraging competition in the electricity sector as well as fine tuning the current SoC.In view of the structural change of the Hong Kong electricity market, we have studied the effect of opening up of the market on the one of the local electricity companies, CLP Power Hong Kong Limited. Found in 1901, CLP generates more than 6,900 megawatts of electricity in the city to provide electricity to 2.2 million Hong Kong people, representing 80% of the market share. On the basis of the SWOT Analysis, it is recommended that CLP shall rely on its experience in operating a variety of power businesses in Asia-Pacific region, its outstanding history in Hong Kong electricity business, its well-established market position as well as its strong asset base to overcome the challenges from both local and potential competitors.