The Government may table a bill early next year to regulate Hong Kong's two power companies through a licensing mechanism.

Secretary for Development Carrie Lam told legislators today the Government is working to reach an agreement with the utilities on the new Scheme of Control Agreements by year's-end.

If a pact cannot be reached by then the Government will table a bill early next year to regulate them through a licensing mechanism. She said if that happens the Government will spare no effort in assisting the council's scrutiny of the bill so the legislative process can be completed within the 2007-08 legislative year.

Mrs Lam said the Government and the companies have discussed in detail the new post-2008 agreements but have not yet accepted the core terms. They include shortening the duration of the agreements from 15 years to 10 years with an option for the Government to extend for five years after a review, lowering the permitted rate of return of the companies from 13.5%-15% on average net fixed assets to an average of below 10%, and linking their permitted rate of return to their achievement of emissions caps imposed by the Environmental Protection Department under the Air Pollution Control Ordinance.