Commentary

Taipower finances justify electricity price hike

(CNA photos)

• Publication Date：04/08/2012
• Source： Taiwan Today
• By  Tu Jenn-hwa

The present financial situation of Taiwan Power Co. justifies the long-planned islandwide increase in electricity prices, provided it is accompanied by appropriate complementary measures.

International fuel prices have been rising steeply since 2003, but Taiwan’s emphasis on the people’s livelihood and the restraining effects of elections make it hard to adjust public utility prices to reflect costs. As a result, Taipower has been operating at a loss since 2006. Its cumulative deficit is expected to surpass NT$165 billion (US$5.60 billion)—half the value of its capital—by May.

If fuel prices remain high, but electricity rates do not go up, the company will accumulate total losses of NT$383.40 billion by the end of next year, leaving it bankrupt.

The average cost to Taipower of generating one kilowatt-hour of electricity is now NT$2.82, but it sells power for as low as NT$2.60 per kwh. Taiwan, which produces no energy resources, charged NT$2.76 per kwh for domestic electricity last year, second lowest among the 34 members of the International Energy Agency, much cheaper than Hong Kong’s NT$3.89, Singapore’s NT$5.25, the U.K.’s NT$5.30, Japan’s NT$7.34, Germany’s NT$10.28 and Denmark’s NT$11.26.

Faced with these figures, refusing to allow a price hike would be unreasonable.

A state-run utility will not be permitted to go out of business, but to keep Taipower afloat without raising power charges, the government would have to inject funds from the national treasury. But as treasury funds are depleted, public infrastructure projects would suffer. At the same time, Taipower would be hard-pressed to operate efficiently while experiencing such huge losses, necessitating even more of the taxpayers’ hard earned money to keep the company solvent.

Amid the weak economy and climbing unemployment of recent years, Taipower’s comparatively high average salary, bonuses and benefits make it hard for the average citizen to accept a power price hike. The company should explain how its pay and perks compare to those of similar firms internationally. If they are lower than most, criticism of Taipower’s personnel costs would not have a leg to stand on. But if they are higher than most, reforms would have to be made.

Other steps the company could take to show its concern for the daily life of the people include relocating transmission and transformer towers, a major public concern, as quickly as possible. Employee facilities ought to be opened up for use by local residents.

The safety of nuclear power plants, and disaster response plans, must be improved. Nuclear waste should be removed from Orchid Island soon (possibly in cooperation with mainland China), and efforts to increase the proportion of electricity produced with alternative energy must be stepped up.

The question now is not whether to jack up power rates, but how. Taipower’s proposed plan already provides for low power consumers and disabled people, but if it could be matched with these complementary measures, public acceptance would be sure to follow. (THN)

Tu Jenn-hwa is director of the Research Department of Business Development and Policy at the Commerce Development Research Institute. These views are the author’s and not necessarily those of Taiwan Today. Copyright © 2012 Tu Jenn-hwa

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