Wed, Aug 28, 2013 - Page 8 News List

EDITORIAL: Electricity compromise a blessing

Because of the nation’s wobbling economic growth and stagnant personal income, Taiwan Power Co (Taipower) yesterday succumbed to widespread public anger and reduced the impact of its latest round of electricity rate hikes.

The company’s compromise may help placate the public while still allowing it to take a breather from mounting financial pressure, as the new rates will help boost Taipower’s revenue by NT$50 billion (US$1.7 billion) this year.

Based on the company’s latest statement, most consumers — about 85 percent of residential households — will not be affected by the increases from the utility’s second-phase rate increase in October. The first-phase, 10.41 percent rate hike was implemented in June last year.

Taipower last year proposed a drastic plan to save the company from insolvency. As of the end of last month, the state-run company had accumulated NT$220 billion in losses. It blamed the government’s subsidy program and the rising prices of raw materials like crude oil, natural gas and coal.

Power generated from coal and natural gas accounted for most — 70 percent — of the power consumed in Taiwan last quarter, according to Taipower’s statistics.

In the newly unveiled price scheme, residential households with monthly consumption of less than 500 units will not be affected, although Taipower originally planned a ceiling of 330 units. Small-scale businesses with monthly power usage of less than 1,500 units will likewise be unaffected, Taipower said.

It is good that Taipower has compromised on its price policy to help stabilize the nation’s economic growth, as its original plan for a 9.64 percent price rise would have eroded 0.02 percent of Taiwan’s GDP. This may seem inconsequential, but the nation’s economy is expanding at a much slower rate this year than what the government expected.

The Directorate-General of Budget, Accounting and Statistics (DGBAS) has trimmed its forecast for Taiwan’s GDP growth to 2.31 percent for this year from the 2.4 percent it estimated in May.

What is more important, however, is that Taipower’s revision — an average price rise of 8.49 percent, rather than the 9.64 percent it initially proposed — is a blessing, as increasing consumer prices and declining personal incomes have placed great financial pressure on the public.

Personal income dropped to NT$47,557 a month from January to June, down from the NT$47,576 reported in 1997, after factoring in a 1.31 percent consumer price increase, according to statistics released by the DGBAS earlier this month.

As most households and small enterprises will not be affected by the electricity rate hike, consumers will be more willing to spend. Private consumption, one of the two pillars of Taiwan’s GDP, is expected to grow 1.59 percent this year, the DGBAS projected. However, the agency said the growth would remain weak.

In the short term, Taipower’s compromise will have a positive impact on the nation’s economy. Raising the electricity rate is the fastest and easiest way to improve the company’s financial situation, but this will not fix its fundamental problem — poor cost structure. To fix this problem, it may be necessary to deregulate the nation’s electricity market.

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