Commentary

Ma makes right call on electricity price increase

ROC President Ma Ying-jeou announces May 1 the decision to implement staggered electricity rate increases. (CNA)

• Publication Date：05/06/2012
• Source： Taiwan Today
• By  Michael Gooch

ROC President Ma Ying-jeou moved to dampen rising public discontent over Taiwanwide electricity price increases May 1, announcing that the changes would be implemented in a mild and gradual fashion. This change of tack, which is an abrupt departure from the previous plan to slug consumers with a one-shot hike, demonstrates the president’s political nous and concern for the people.

For some sections of Taiwan society, Ma’s decision illustrates an unwillingness to make tough choices and tendency to be swayed by raucous public outcries. But the president is no populist policymaker, he is a leader who relishes making difficult decisions—irrespective of how unsavory they may be at the time—if they are genuinely in the best interests of the nation.

Case in point is the Cross-straits Economic Cooperation Framework Agreement (ECFA). When Ma first floated the possibility of this pact, his critics wasted no time in leveling all manner of charges against him ranging from fiscal capitulation to jeopardizing ROC sovereignty. But with Taipei and Beijing set to celebrate the second anniversary of the pact’s signing next month, there is no question it has played a central role in boosting the local business environment and positioning the island as the perfect springboard for penetrating the mainland Chinese market.

If Taiwan is to fulfill its potential as an economic, investment and trade hub, which is now possible under the ECFA, then pricing electricity at rates that reflect reality and are more on par with those in neighboring economies is a must. This is one of the reasons why the Ministry of Economic Affairs decided to push up power charges by 10 percent to 37.3 percent effective May 15.

Instead of imposing the rise all at once, the president wants to introduce it in three stages, minimizing any possible impact on the public and business sector. His goal of restoring rates to a reasonable level remains unchanged, but the government will now take into consideration the opinions of all parties involved in the process.

Ma’s idea of levying 40 percent of the increases from June 10, with another 40 percent six months later, makes perfect sense. The public is struggling to come to terms with the specter of inflation and is extremely sensitive at present to any additional pressure on the hip pocket.

The remaining 20 percent, which will be implemented at a later date, hinges on the progress of reforms at state-owned Taiwan Power Co. Ltd. The MOEA has been directed to put the operations of Taipower under the microscope to identify inefficiency and waste.

The utility’s key performance indexes of cost controls, personnel expenses and procurement practices are to be looked at with the goal of boosting operational efficiency. Changes will be made where possible, and savings passed on to the consumer in due course.

State-owned Taiwan Power Co. expects higher electricity rates to improve the company’s operations and promote energy savings. (CNA)

Taipower is repeatedly accused of refusing to tighten its belt and adapt to new market conditions. Yes, it offers salaries and perks not available to the average citizen, but are these out of whack with what its counterparts around the world offer?

Simple economics show that benefits are the least of the company’s concerns when it comes to calculating the cost of electricity. International prices for coal, natural gas and crude oil have surged 31.6 percent, 88 percent and 54 percent, respectively, over the past three years. But Taipower has been unable to pass these costs onto the consumer, forcing the company to operate at a loss of NT$118 billion in 2011, with pretax losses set to hit NT$100 billion in 2012.

If these prices remain high and electricity rates do not go up, the utility will accumulate total losses of NT$383.40 billion by year-end 2013, leaving it bankrupt.

Taipower’s average cost of generating electricity is now NT$2.82 per kilowatt-hour, but it sells for as low as NT$2.60. Taiwan, which imports 99.4 percent of its energy, charged NT$2.76 per kilowatt-hour for domestic electricity last year, second lowest among the 34 members of the International Energy Agency. This was much cheaper than Hong Kong, NT$3.89, Singapore, NT$5.25, the U.K., NT$5.30, Japan, NT$7.34, Germany, NT$10.28, and Denmark, NT$11.26.

The latest statistics released by the U.S. Department of Energy reveal a similarly unacceptable situation when it comes to Taiwan’s industrial electricity rates, which are pegged at fourth lowest in the world.

It is impossible to deny that the island’s domestic and industrial electricity charges run counter to government policy of promoting energy saving and developing power-efficient industries. And while the president is deeply concerned about the effect of rising prices on society, the decision to introduce higher rates is correct and one a responsible administration has no choice but to make.

There is no question that staggered increases soften the blow for consumers and offer hope that the additional 20 percent charge may prove unnecessary if Taipower organizational tweaks take place. Yet it is impossible to get around the fact that higher energy costs are here to stay. The people of Taiwan should accept Ma’s gesture in the good grace it was intended and work with the government to ensure a smooth transition to this new reality.

Michael Gooch is a freelance writer based in Lienchiang County. These views are the author’s and not necessarily those of Taiwan Today. Copyright © 2012 by Michael Gooch

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