Taiwan Power Co (Taipower, 台電) is considering multiple approaches — including cutting electricity rates — to reflect the reduction in its costs due to a drastic decline in global crude oil prices, Minister of Economic Affairs John Deng (鄧振中) said yesterday.
Deng said the state-owned company is expected to turn a net profit of NT$20 billion (US$639.38 million) this year, which would make it the company’s first profitable year since 2006.
Taipower estimates the company saved NT$9 billion in costs owing to the plunge in international oil prices, Deng said.
The newly appointed minister said there are several approaches the company could take to share the savings with the public.
Taipower might allocate some of the NT$9 billion when making plans for rate cuts or compensation plans in the future, he said.
“Although Taipower could see a profitable year, it still has debts of NT$208.4 billion from previous years,” Deng said.
The ministry plans to discuss how much of this year’s profits should be used for debt repayment and how much should be returned to the public.
Deng said Taipower has proposed a formula for calculating electricity rates that is similar to one used by CPC Corp, Taiwan (CPC, 中油) to reflect the company’s cost structure and it is pending legislative approval.
“We need a formula to reflect the power generation cost over time, so we can cut or raise electricity prices in accordance with fluctuations in costs,” Deng said.
Once lawmakers approve the proposed formula and Taipower has an accurate figure for its profits for this year, the ministry and Taipower will discuss how to share the profits with the public.
“Electricity rate cuts is one option, but we are also considering rewarding people who have conserved energy,” Deng said.
The ministry is also considering refunds based on electricity usage.
However, Taipower president Chu Wen-chen (朱文成) wants to take a more conservative approach, especially in terms of rate cuts.
Chu told reporters that the interest on the NT$208.4 billion debt amounts to more than NT$3 billion annually, so that if Taipower were to amortize the debt over 10 years, it will have to earn at least NT$21 billion annually to pay off the sum owed.
“If we do not repay the debt from our losses with this year’s net profits, but cut electricity rates instead, future generations will be forced to bear the heavy debt burden,” he said.
Instead of lowering rates, Taipower may share part of this year’s profits with the public by rewarding energy conservation and paying off some of its debt.
In related news, Premier Mao Chi-kuo (毛治國) also touched on electricity rates in his first news conference as premier.
He said the rates must reflect the recent decline in global crude oil prices.
The economics ministry has been tasked with devising a formula to calculate an appropriate price for electricity and once a consensus is reached among relevant governing bodies, the price of electricity will be adjusted retroactively — according to the new pricing formula — to reflect the recent changes in crude oil prices, he said.
Mao said there are several technical hurdles and dissenting opinions that must first be resolved to reach a consensus.
Additional reporting by CNA
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