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Following is a question by the Hon Tang Ka-piu and a written reply by the Secretary for Transport and Housing, Professor Anthony Cheung Bing-leung, in the Legislative Council today (May 25):
Question:
Some members of the public have relayed to me that the current procedures for selecting centralised liquefied petroleum gas (LPG) suppliers for subsidized housing estates/courts are unfair, and it is difficult for the public to monitor the quality of gas supply service and whether the LPG prices are reasonable. In this connection, will the Government inform this Council:
(1) whether it has grasped and regularly monitors the price data on centralised LPG sold by various suppliers, including changes in costs as well as in import and retail prices; if so, of the details;
(2) whether it has required all suppliers to publish the price information on centralised LPG; if so, of the details of such information, including the relevant web addresses (if such information is published on websites);
(3) of the approaches adopted by the authorities for selecting suppliers for subsidized housing estates/courts; whether the supplier who secured the gas supply service contract of a housing estate/court through an open tender will, upon expiry of such a contract, be awarded a new gas supply service contract of that housing estate/court without the need to go through a competitive bidding process; if so, of the details; and
(4) in respect of each of the housing estates/courts whose suppliers are currently selected through open tenders, of the respective terms of the first and subsequent service contracts awarded to the suppliers concerned?
Reply:
President,
Energy supply is under the policy purview of the Environment Bureau.
Having consolidated the information provided by the Environment Bureau, my reply to the Hon Tang Ka-piu's questions is as follows:
(1) The prices of domestic liquefied petroleum gas (LPG) (including piped LPG and cylinder LPG) have all along been determined by individual oil companies with regards to commercial practices and their respective operating costs. However, the Government appreciates and is concerned about the impact of LPG prices on the public and therefore encourages the industry to enhance transparency on price-setting.
Since 1999, a major local LPG supplier (the Company) has established a price adjustment mechanism of domestic LPG on its own initiative to enhance the transparency of price-setting. The Government understands that the adjustments of listed prices of piped LPG and wholesale prices of cylinder LPG of other oil companies in the market generally follow those of the Company. Their price adjustments are therefore very close to each other.
In monitoring domestic LPG prices, it has been the Government's prevailing practice to make reference to the movement of international LPG prices (calculated based on Saudi Arabia monthly exporting Contract Price*) and local LPG import prices, and in turn assess whether the price forecasts are reasonable. The Government also regularly meets with the Company in the course of its price review to discuss and provide views on its price forecasts; and follow up with the Company on its upward or downward price adjustments due to the difference between actual and forecast price in its last review, and assess whether its annual adjustment of the operating cost is reasonable.
* For details, please refer to www.emsd.gov.hk/en/gas_safety/lpg_vehicle_scheme/auto_lpg_prices/index.html
In accordance with the above price adjustment mechanism, the Company adjusts the price of domestic LPG once every three months (i.e. at end of January, April, July and October). According to data analysis by the Government, the LPG import price in January 2016 (i.e. $4.24/kg) has dropped by around 50% (i.e. around $4.7/kg) from January 2014 (i.e. $8.97kg). During this period, in response to the falling import price, the Company has adjusted the listed price of domestic piped LPG downwards, with a reduction of $11.55/cubic metre (i.e. around $4.7/kg), which represents around 50% of the LPG import price in January 2014 (i.e. $8.97/kg). This is generally in line with the trend movements of international LPG price over the same period. The import price and retail price data of domestic LPG are set out at the Annex 1.
The Government will endeavour to ensure the reliability of energy supply, maintain an open market and remove barriers of entering the market in order to enhance competition.
(2) In response to the Hon Tang's earlier request, the Environment Bureau has written to all the domestic piped LPG suppliers to request them to publish their price information. Two of them have published the updated domestic piped LPG prices on their websites since July last year, and the respective websites are as follows:
Shell: www.shell.com.hk/en/products-services/lpg/all-about-lpg.html
Sinopec:www.sinopechk.com
The other supplier expresses that it supplies domestic piped LPG and cylinder LPG through operators and distributors, instead of supplying to domestic users directly. As a wholesaler, it is unable to publish price information about its domestic piped LPG products because of its company policy.
(3) Regarding the use of Towngas and piped LPG in public housing developments, since additional land is required for accommodating central LPG supply facilities within individual public housing developments, the Hong Kong Housing Authority (HA) has adopted Towngas supply for its public housing developments in general as far as practicable. For those housing estates or courts in remote areas or where Towngas supply was not available at the time of construction, HA had invited LPG suppliers to provide central LPG supply through open tenders.
Regarding public rental housing (PRH) estates, after the first contract is awarded to the LPG supplier, the staff of Housing Department will regularly monitor the performance of the LPG supplier in various aspects, including staffing provision, supervision, management coordination, customer service, maintenance and repair, etc., and will seek residents' views on the supplier's services through the Estate Management Advisory Committee during the contract period. According to the prevailing policy, on the premise of ensuring a safe and stable gas supply to residents, if the performance of the LPG supplier was satisfactory during the contract period, HA will renew the contract with the supplier upon expiry of the first contract for a term of 10 years. This renewal arrangement will prevent temporary suspension of service and possible disturbance to the residents, including the need for residents to sign a new service agreement with a new provider, pay a new deposit or even replace their cooking appliances as a result of a change of supplier.
As for Home Ownership Scheme courts and Tenants Purchase Scheme estates, upon expiry of the contract between the HA and the supplier, the owners' corporations concerned may opt for automatic extension of the contract, or make arrangements for a new supply contract, including re-tendering. Under the new contract or re-tendering, owners may receive premiums or be required to pay charges. In either scenario, the premium or charges are handled by the owners' corporations but not HA.
(4) At present, 15 housing estates of HA are provided with central LPG supply system. The contract periods of the first and subsequent contracts for the LPG supply services are set out in Annex 2.
Ends/Wednesday, May 25, 2016
Issued at HKT 19:50
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