LCQ13: Agreement for supply of Dongjiang water to Hong Kong
Following is a question by the Hon Kenneth Leung and a written reply by the Secretary for Development, Mr Paul Chan, in the Legislative Council today (November 12):
Recently, the Government reached an agreement with the Guangdong authorities for supply of Dongjiang water to Hong Kong in the next three years. While the agreement has specified an annual supply ceiling, the quantity of Dongjiang water to be imported to Hong Kong may be adjusted flexibly according to the actual need. The agreement also retains the "package deal lump sum" approach for calculating water prices adopted since 2006, under which the Government pays the annual lump sum water prices regardless of the actual quantities of Dongjiang water imported to Hong Kong. There have been comments that as the quantities of Dongjiang water imported to Hong Kong over the past years were lower than the supply ceiling specified in the agreement, it will help save public money if the calculation of water prices is based on the actual quantity of water imported. In this connection, will the Government inform this Council:
(1) of the annual quantity of Dongjiang water imported to Hong Kong and its percentage in the agreed supply ceiling since the adoption in 2006 of the package deal lump sum approach for calculating water prices;
(2) whether the authorities will reconsider discussing with the Guangdong authorities the adoption of an alternative approach for calculating water prices under which payment is based on actual supply quantity; and
(3) whether the Guangdong Investment Limited, which is responsible for water supply operation, participated in the discussion process in respect of the aforesaid agreement; if it did, of the role of the company?
Hong Kong lacks natural fresh water resources. Our fresh water resources mainly come from rainfall. But the yield collected from local catchment is inadequate to meet our needs. Besides, the rainfall is unstable leading to significant fluctuation in the yield collected from catchment each year. According to the records for past 30 years, the local yield per annum ranged between 100 to 360 million cubic metres (mcm) (Note: The average annual fresh water consumption of Hong Kong over the past 10 years (2004-2013) is about 950 mcm.), differing by over 200%. Dongjiang water, which now provides about 70% to 80% of our fresh water supply, is able to fill the gap arising from the inadequate local yield. Therefore, a reliable and stable Dongjiang water supply arrangement is essential to Hong Kong.
We have adopted the "package deal lump sum" approach in the Dongjiang water supply agreements since 2006, which guarantees an annual supply of Dongjiang water up to the ceiling in the supply agreements. The actual quantity of Dongjiang water imported can also be flexibly adjusted in accordance with the local yield of the year. Under this approach, Hong Kong is assured of an adequate fresh water supply even under drought condition with a return period of one in 100 years. We can also avoid importing Dongjiang water more than necessary in years of high yield, thereby avoiding wastage of water resources and saving pumping cost. Therefore, the "package deal lump sum" approach is well-suited to the actual situation of Hong Kong.
My reply to the three parts of the question raised by the Hon Kenneth Leung is as follows:
(1) Since the adoption of "package deal lump sum" approach in 2006, we have been importing Dongjiang water as needed in accordance with the local yield of the year. The quantities of Dongjiang water imported to Hong Kong and their respective percentages as compared with the agreed annual supply ceiling for the period between 2006 and 2013 are shown in the Annex.
(2) During our discussion with the Guangdong authorities on the new water supply agreement for the next three years, we have explored the adoption of "payment on actual supply quantity" with the Guangdong side. As no annual supply quantity will be specified under this payment approach and given the keen competition for Dongjiang water from Shenzhen and some cities in Guangdong Province, the Guangdong side considers that they will have difficulty in guaranteeing that the water supply quantity requested by Hong Kong can be met. In particular during the drought years, as Hong Kong and Guangdong Province are under the same climatic setting (in terms of rainfall pattern, temperature, etc.), both the local yield and the quantity of Dongjiang water available for distribution will dwindle. The Guangdong side might not be able to provide adequate Dongjiang water to meet our demand. This would affect the security of the water supply of Hong Kong.
With the "payment on actual supply quantity" approach, a unit water price will need to be determined. Since there is no specified supply quantity, the Guangdong side may have to make due allowance for the uncertainty in the actual supply quantity in fixing the unit water price to ensure a reasonable income for their operation expenses and investment return. As such, Hong Kong may end up paying more under the "payment on actual supply quantity" approach than the current "package deal lump sum" approach when the demand for Dongjiang water increases during drought years.
In view of the above, we propose to retain the "package deal lump sum" approach in the new agreement.
(3) The Development Bureau and Water Supplies Department of the Government of Hong Kong Special Administrative Region are responsible for discussing the Dongjiang water supply agreement with the Department of Water Resources of the People's Government of the Guangdong Province. The Guangdong Investment Limited was not involved in the discussion.
Ends/Wednesday, November 12, 2014
Issued at HKT 12:14