The key terms of the new agreements fully meet the public expectations expressed during the two rounds of consultation in 2005 and 2006, and fully reflect the government's policy objectives of 'reducing tariffs and emissions, and paving the way for an open market.'

He added that the agreements would enable early preparation for competitive markets when the time is ripe.

The companies' permitted rate of return will be reduced to 9.99 percent, from the current 13.5 to 15 percent.

China Light & Power customers will enjoy basic tariff reductions from October 1, with Hong Kong Electric users following suit from January 1.

Yau noted that to pave the way for possible opening up of the electricity market, the government would make necessary preparations during the next regulatory period, including studies on open market models and the regulatory frameworks, as well as enhanced interconnection between the grids of the two power companies.