Taiwan Power Co (Taipower) chairman Edward Chen (陳貴明) resigned abruptly on Saturday, saying he hoped doing so would promote management reform. With public dissatisfaction over fuel and electricity price increases, Taipower now has a historic opportunity to improve.
To achieve this, they should look at reforms in the Japanese power industry following the disaster at the Fukushima Dai-ichi nuclear power plant last year. Japan is separating power generation from power transmission and distribution, something the Organisation for Economic Co-operation and Development (OECD) suggested a long time ago. In the future, Taipower could focus on increasing the efficiency of power transmission and distribution load management.
This would result in more transparent power costs, allow diversification of power generation sources and create a fair foundation for energy from renewable sources.
Japan’s 10 power companies control different regions. These companies have been privatized, but the market has yet to be liberalized. In its plan for compensation to be paid out by Tokyo Electric Power Co, issued in May last year, the Japanese government offered suggestions for changing how business is conducted in the power sector.
At the end of last year, two areas for reform were decided: allowing free competition in the power generation industry and allowing consumers to freely choose a provider. This would create more reasonable pricing and balanced supply and demand. In the next couple of months, a law similar to renewable energy legislation in Germany and Taiwan will take effect in Japan that will make it mandatory for power companies to purchase electricity generated from renewable sources.
However, because the separation of power generation from power transmission and distribution threatens to have an impact on the core profits of power operators, the idea has met with resistance.
Because of the links between the commercial, official, government, political and academic arenas in Japan’s so-called “nuclear villages,” a term that refers to nuclear power plants built in the vicinity of coastal and rural villages, many of the major stockholders in Japanese power companies are local governments. For example, the third-biggest stockholder in the power industry in the Tokyo area is the Tokyo Metropolitan Government, and the Osaka government is the largest stockholder in the Kansai region.
Tokyo Governor Shintaro Ishihara, who has proposed the establishment of a natural gas power plant in Tokyo Bay and said that nuclear power is a battle between new and old, has joined Osaka Governor Toru Hashimoto to promote the separation of power generation from power transmission and distribution to remove the influence of the power companies who often control the Japanese political world.
Nuclear power until recently accounted for more than 30 percent of Japan’s energy and since the Japanese government has promoted the low cost of nuclear energy, it is both odd and contradictory that Japan has the world’s third-highest electricity prices. The main reason for this is that power costs are calculated in terms of overall cost, which includes a fixed interest rate of 3 percent of the cost. This means power suppliers are more than willing to introduce greater amounts of high-investment nuclear energy because they will make more money in absolute terms. In addition, the central government’s power budgets include funds to co-opt local governments into letting the government build nuclear facilities in these areas.