HK Electric cuts May fuel charge but warns of sharp rise from mid-year

HK Electric will lower its fuel clause charge (FCC) to 26 cents per unit of electricity in May, down 4.4 cents from April, but has warned that rising global energy prices linked to tensions in the Middle East are expected to push costs significantly higher from mid-year.

The company said the reduction reflects a lag in the monthly adjustment mechanism, under which the FCC is calculated based on the average actual fuel costs from January to March. During that period, fuel prices were relatively stable, particularly in the first two months of the year.

A spokesman said the current charge “has not yet reflected the significant and sharp surge in international oil and natural-gas prices resulting from heightened tensions in the Middle East since March.”

“The current adjustment mechanism has an inherent deferred effect,” the spokesman said. “While the FCC for May has decreased due to the lower fuel costs earlier in the year, the impact of the sharp and substantial rise in fuel costs following the outbreak of the Middle East conflict will be unavoidable.”

The company added that these higher costs are expected to begin feeding through into the FCC from mid-year, at which point the charge “will rise significantly.”

HK Electric said the relatively lower fuel costs earlier in the year, together with adjustments to its fuel mix and supply arrangements, have provided a buffer for customers in the short term.

The spokesman added that the company will continue to monitor developments in the global energy market and manage fuel procurement and power generation accordingly to maintain a stable electricity supply.

The FCC is determined under a “pass-through” mechanism, meaning the utility recovers only the actual fuel costs incurred without making a profit.
 

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