Minister of Economic Affairs Shih Yen-shiang (施顏祥) yesterday said the government was considering revising Taiwan Power Co’s (Taipower, 台電) purchasing contracts, after opposition lawmakers accused the state-run company of overpaying its suppliers.
“Basically, the government had promised to buy electricity from independent power producers [IPPs] for 25 years,” Shih said at a legislative committee hearing.
“We had set a purchasing price that would change with the fluctuation of fuel prices,” he said. “Taipower is operating at a loss, but these IPPs need reasonable profits.”
Shih said both sides would have to agree to begin talks on the issue, but the government would decide how best to proceed.
“The government thinks there is some controversy between the two sides and will figure out what to do about the contracts,” he said.
In 1995, Taipower decided to buy electricity from the IPPs to meet increasing demand because it was not easy for Taipower to build new power plants at the time, Shih said.
With the involvement of the IPPs, Taipower’s reserve margin improved from 4.7 percent in 1995 to between 15 percent and 20 percent, he said.
The reserve margin, also known as reserve capacity, is an energy company’s capacity to generate more energy than the system generally requires at peak usage, or the amount of energy still available during peak usage hours.
Shih was responding to legislators from the Democratic Progressive Party and the People First Party, who said earlier in the day that Taipower had been overpaying the IPPs.
It costs Taipower NT$2.89 (US$0.098) on average to generate one kilowatt hour of electricity, but the company spends NT$3.58 per kilowatt hour on average to buy electricity from IPPs, the -legislators said.
Taipower chairman Edward Chen (陳貴明) said at the hearing that when the 25-year contracts expire, Taipower would decide whether to continue buying electricity from IPPs, based on its reserve margin.
If Taipower can maintain a reserve margin of more than 16 percent in the long term, it will not need to buy electricity from IPPs, Chen said.