In a bid to set fair domestic electricity rates, legislators yesterday reached an agreement on a new electricity pricing mechanism, which will cap annual electricity rate increases at 6 percent.
The new pricing scheme will take effect in April at the earliest, with legislators saying that as international crude oil prices are likely to continue to fall, it is expected that electricity rates will fall after consumers receive their June electricity bills, Minister of Economic Affairs John Deng (鄧振中) told a media briefing.
Based on the new pricing scheme, state-run Taiwan Power Co (Taipower, 台電) is required to adjust its electricity rates every six months in accordance with the fluctuation of fuel costs, including the prices of crude oil, coal and natural gas, Deng said.
Price increases will be limited to 3 percent every six months, or 6 percent on an annual basis, he said.
“On the other hand, Taipower has to completely reflect the falling costs of power generation in the electricity prices if there are any,” Deng said.
Lawmakers also agreed to a “reasonable” profit margin of between 3 percent and 5 percent for Taipower.
As of last year, Taipower had accumulated NT$193.5 billion (US$613.31 million) in losses, Deng said. To help write off the losses, lawmakers agreed to allow Taipower to enjoy a profit margin of 5 percent at most until the company clears the debt, Deng said.
“After Taipower pays off its accumulated losses, the ‘reasonable’ profit margin will be set at 3 percent,” Deng added.
That reasonable profit margin range would guarantee the company a profit of between NT$10.5 billion and NT$17.4 billion a year, Taipower chairman Hwang Jung-chiou (黃重球) said, citing a company estimate.
Hwang said although the new pricing mechanism begins in April, Taipower would still increase summer electricity rates between June and September.
“The summer electricity price increase has been in force for more than two decades to conserve energy and we will continue with the policy to encourage people to conserve energy,” Hwang said.
Hwang said that the cost of developing renewable energy sources had also been factored into the pricing mechanism.
“Households which use 400 kilowatt-hours per month will pay NT$4 more per month to pay for renewable energy development,” Hwang said. “That said, we are still confident that electricity rates in April will be lower than the current rates due to the decline in global oil prices.”
During the meeting, lawmakers agreed to review the electricity pricing mechanism again in two years.
Separately, lawmakers requested that the Executive Yuan send an amendment to the Electricity Act (電業法) to the legislature for deliberation within six months.
“We will give the proposal to the Cabinet at the beginning of February at the latest,” Deng said.
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