Minister of Economic Affairs Yiin Chii-ming (尹啟銘) yesterday rejected calls for power rate cuts because of high coal prices, but conceded that rates could be lowered if global fuel prices were to trade below the state-run utility’s power-generating costs.
Yiin made the remarks at the legislature’s Economics Committee amid threats by Democratic Progressive Party (DPP) and Chinese Nationalist Party (KMT) lawmakers that they would block the ministry’s budget for next year if it did not comply with their request to lower energy and electricity prices.
The committee demanded that Taiwan Power Co (Taipower, 台電) lower its rates in line with decreasing raw material prices worldwide and asked the state monopoly to cut electricity prices if fuel costs were to fall back to the level recorded on Oct. 1, when the company started increasing rates.
The committee also called on Taipower to report to the legislature if it plans to hike rates again, adding that it could only increase rates one month after announcing the rate adjustments.
In response, Taipower chairman Edward Chen (陳貴明) said the composition of the utility’s energy sources was complex and the time gap between the company’s energy purchases and current oil prices made it difficult for the company to fully reflect prevailing oil prices.
Chen said that “fuel costs account for more than 60 percent of the utility’s total costs this year, with the remainder coming from power transmission, electricity distribution and other operational expenses. By 2009, fuel costs are estimated to account for more than 67 percent of Taipower’s total costs.”
Presenting its estimates for power generation, the utility firm said 83.45 percent of its electricity this year would be self-generated and 19.04 percent would be purchased from privately owned power generators.
Coal-fired power is estimated to account for 42 percent of the nation’s energy production, followed by natural gas with 24 percent, company data showed.
But in terms of cost structure for power generation, natural gas and coal are estimated to account for 44 and 35 percent respectively, while fuel oil is expected to account for only 13 percent.
Hence, the correlation between utility prices and global oil prices is low, underlining Taipower’s inability to reduce electricity costs immediately, the company said.
Taipower reported cumulative losses of NT$93.2 billion (US$2.84 billion) in the first 10 months of this year. The company forecast that full-year losses would exceed NT$100 billion. The company has been in the red since 2006.
The state utility also said that it purchased coal at a cost of NT$4,082 per tonne last month, and the company would only start cutting electricity prices when coal prices drop to NT2,844 per tonne.
The same applies to natural gas. The company said it purchased natural gas at a cost of NT$17.31 per cubic meter and would consider lowering rates when natural gas prices fall to NT$14.84 per cubic meter.
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