The Ministry of Economic Affairs yesterday said it would freeze electricity prices for another six months, as it expects falling crude and coal prices to help reduce power generation costs.
The ministry said it sees only a slim chance of power prices increasing in the second half of this year, as a wobbling global economy might reduce fuel consumption and keep prices in check.
“The electricity review committee concluded its [twice-yearly] meeting by keeping electricity rates unchanged, as fuel prices are to trend down in the longer term,” Deputy Minister of Economic Affairs Tseng Wen-sheng (曾文生) told a media briefing in Taipei.
“Fuel costs play a major role in the electricity price adjustment mechanism,” Tseng said.
State-run Taiwan Power Co (Taipower, 台電) said fuel costs account for 55 percent of overall power generation costs, as about 80 percent of the nation’s electricity is produced at thermal power stations that burn coal, natural gas or crude oil.
Crude oil prices are expected to crawl back to about US$61 per barrel this year, compared with a peak of US$75 per barrel in September last year, the ministry said, citing a forecast by the US Energy Information Administration.
Global coal prices are expected to fall to about US$77 per tonne, from about US$108 per tonne in September last year, the ministry said, citing a projection by Macquarie Bank Ltd.
Looking forward, “there should be no price hike pressures, given a downturn in global fuel prices and the global economy,” Tseng said.
The prices “would be subject to Taipower’s financial performance,” he added.
The committee rejected Taipower’s proposal to raise electricity rates by 6.48 percent, capping rates at NT$2.6253 per kilowatt-hour until September.
The ministry denied speculation that it halted price hikes out of political considerations.
The committee was widely expected to increase electricity prices by 3 percent, the maximum adjustment set by the government, to help Taipower mitigate losses.
The ministry froze price hikes in the previous review in September last year in a bid to help tame inflation, despite a spike in fuel prices at the time and going against a pricing mechanism created in 2017.
The committee yesterday preliminarily approved the allocation of NT$36.4 billion (US$1.18 billion) from the energy price stabilization fund to offset Taipower’s losses.
After deducting the subsidy, the fund would shrink to NT$41.6 billion.
The state utility lost NT$14 billion last year, ending four straight years of profits. It lost NT$10.2 billion in the first two months of this year.
The ministry also said that May would not be included in the summer electricity period, during which Taipower increases electricity prices to encourage energy conservation.
May is not among the top five months with regard to energy consumption, it said.
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