HK Electric-SS (02638) announced on April 24th that the fuel cost adjustment fee for May will be lowered to 26 HK cents per kilowatt-hour, a decrease of 4.4 HK cents compared to April. The company explained that this reduction is primarily due to a "deferred effect" inherent in the month-to-month adjustment mechanism, which mainly reflects the lower fuel costs from January to March. However, following the outbreak of conflicts in the Middle East, fuel procurement costs have surged sharply. The utility forecasts that the fuel cost adjustment fee will see a significant increase starting from the middle of the year.
The net electricity charge billed to customers by HK Electric consists of a basic tariff and the fuel cost adjustment fee. The fuel adjustment fee is reviewed monthly. The fee for a given month is determined based on the average actual fuel cost from the three months preceding the month in which the fee is announced. For example, the May fuel adjustment fee is calculated using the average actual fuel costs from January, February, and March of 2026.
A company spokesperson noted that although the international energy market has experienced volatility and sharp price increases since March due to geopolitical tensions, fuel costs in the first two months of the year were relatively low. Additionally, adjustments made to the fuel mix and fuel supply management in response to the Middle East situation have provided some buffer for customers. The spokesperson emphasized that the May fuel adjustment fee does not yet fully reflect the substantial surge in international oil and natural gas prices triggered by the Middle East tensions starting in March.
The impact of the sharp rise in fuel procurement costs following the outbreak of conflict in the Middle East is unavoidable. It is anticipated that these higher fuel costs will begin to be reflected in the fuel adjustment fee from the middle of the year onwards, at which point the fee is expected to increase significantly. HK Electric stated that it will closely monitor the energy market and supply situation, while prudently managing fuel inventory, power generation operations, and compliance with emissions regulations to ensure a stable electricity supply. The fuel cost adjustment fee is determined under a transparent "cost-pass-through" mechanism, meaning HK Electric only recovers the actual fuel costs incurred and does not generate profit from this fee.
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